An analysis of the Indian Cashless Health Insurance Industry identifying the key structural deficiencies leading to a situation of distrust between parties involved. The study as a part of IIM, Indore’s Consulting competition, Chanakya, organized in association with Cognizant also proposes solutions for resolving the present imbroglio between the service providers and insurance companies.

1. Chanakya 2010, IIM Indore
Team Unnati, Great Lakes Institute of Management
Nitin Pahuja: nitin.pahuja@greatlakes.edu.in, 09884070606
Ujjawal Jain: ujjawal.jain@greatlakes.edu.in, 09962082884

2.  Macro analysis of the Indian and Western Health Insurance Market
- Process dynamics of Cashless Insurance in both markets
- Highlight key gaps in the Indian structure leading to inefficiencies
- Identify key processes from the western model that can help bridge gaps in Indian market
 Proposing plausible solutions to ensure seamless operation of Cashless
Health Insurance facilities in India leading to
- Improve the quality of healthcare
- Enhance the coverage of Health Insurance
- Reduce the cost at all possible platforms
- Facilitate development of a co-operative eco-system in the industry
2

3. India is on the anvil of becoming an economic superpower leveraging its demographic
dividend. A dynamic & healthy workforce in context of our rapidly growing service economy
is critical. Ensuring that our young population remains healthy and continues to operate at
maximum productivity is an important imperative. World-class and inclusive healthcare
financing is critical for India’s 2020 vision as most of the healthcare expenditure is still paid
out of pocket by individuals, leading to financial distress or inadequate care. In this
context, there is a clear need for a rapid increase in access to health insurance.
Indian Health Insurance Industry is still in its infancy and has just about reached a stage of
transition. In order to take-off on a trajectory of unprecedented growth in correspondence
with the economy’s overall growth prospects, it is important for the industry to plug
inherent gaps and structural deficiencies.
Benchmarking the policies of the west comes across as an obvious choice in this context,
however doing it blindly can lead to serious consequences. The western markets have
failed in various respects like reducing the cost of health care and widening the cover of
insurance over a long period of time. It is therefore important to critically evaluate the best
practices across industry and customizing them to Indian markets’ needs.
It is with this endeavor to lay out a plausible and actionable growth path for the industry
that we highlight the key leanings from the west that when customized to Indian needs can
deliver great results. This study has committed itself to the cause of identifying factors,
practices and strategies that can
1. mprove the quality of healthcare
I
2. nhance the coverage of Health Insurance
E
3. educe the cost at all possible platforms
R
4. acilitate development of a co-operative eco-system in the industry
F

4. Methodology
In this study we have outlined the key dynamics of the Indian Health Insurance market. We have covered critical
macro aspects of the Industry like its structure, potential for growth and key stakeholders. The macro analysis of
the industry is followed up by a focused overview of the basic processes involved in the functioning of ‘Cash-less
insurance’ (being the primary area of exploration for this study).
The next segment of the report deals with key learnings from the western Health Insurance model. We have
outlined core competencies for a healthy health insurance industry drawing its origin from the US Health
Insurance industry. The penultimate section deals with an insight into the Indian industry with a focus on key
problems and their respective root causes categorized with respect to the following perspectives:
1. Insurance Companies
2. Healthcare Service Providers
3. TPA’s
4. Industry as a whole (Macro Issues)
The last section deals with suggestions that can facilitate Indian Health Insurance Industry’s evolution into a truly
world-class healthcare management system which is affordable, inclusive and flexible. The suggestions have
been elaborated under the following heads
• Grading of Healthcare Service Providers and products on the basis of service quality & premium charged
• Establishment of Standard operating procedures across the industry
• Establishment of internal controls alongside process audits
• Product innovation in the Indian health insurance industry
• Channel Distribution: Reaching out to “Bharat”

5. Health Insurance a national need
• India currently spends about 6% of its GDP on health care.
• Out of this more than 70% is “Out of pocket expense.”
• Despite such high share of individual expenditure, provision
of health care not satisfactory.
• More than 40% of hospitalized Indians have to borrow or sell
assets to meet hospitalization costs.
• Around 25% of hospitalized Indians fall below poverty line in a
single year as a result of hospitalization expenses, causing a
rise of 2% in proportion of poor population.
Source: Mckinsey
Health insurance: current and future scenario
• Revenue attributable to insurance or Third Party Administrators (TPAs) has
grown significantly over the last few years
• Total credit billing is likely to increase further to 50 per cent by 2011-12.
• Domestic health policy premiums have shown significant increase in the in
the last few years
• The number of policies issued as Medi-claims, ESIS, and CGHS are
4,631,534, 8,400,000 and 1,040,000, respectively.

6. Health Insurance
Structure in India
Social Health Private health Community Health
Insurance insurance Insurance
CGHS ESIS
Potential in numbers
 Health Insurance - potential to become a US$ 3.8 Bn industry by 2012.
 No. of elderly people in the Developing World will TRIPLE in 25yrs. (WHO)
 In India, the no. of people above 60 yrs is about 8% today, with that no.
expected to hit 21% by 2025. (Asia Insurance Review)
• Source: NIA Library 6

7. Cashless Heath Insurance : Basic
Process Flows
Cashless Heath Insurance : Stakeholders
Consumer
Strategic tie-ups that
give access to
discounted rates
and high volume
for respective
parties
Insurance Company Healthcare Provider
TPA

8. Cashless Insurance Process Flows: US vs India
Healthcare Provider with a tie up
with Insurance Co
Consumer gets Cashless service
and the Insurance co pays the
service provider
Cashless insurance
Process in the US
Consumer pays a certain percentage of the bill, which varies from policy to policy
COPAY: The consumer shares a
Consumer pre-decided percentage of the total
bill, the rest is paid by Insurance co
Healthcare Provider with no tie up
with Insurance Co
Cashless
request
Insurance
TPA
reviews
In
case
of
approval
the
Network
submi8ed
to
Insurance
the
request
and
informs
co
at
the
0me
of
the
hospital
with
the
bills
are
se8led
by
Hospitaliza0on
Insurance
Co
admission
authoriza0on
status
Cashless
Insurance
Process
in
India
He
can
file
a
claim
He
can
file
a
claim
request
which
if
In
case
of
rejec0on
the
request
which
if
Out
of
network
Customer
needs
to
approved
shall
be
customer
needs
to
approved
shall
be
Hospitaliza0on
se8le
all
the
bills
reimbursed
by
the
se8le
all
the
bills
reimbursed
by
the
insurance
co
insurance
co

9. Key takeaways from the western model
• Improving health should be the ultimate
objective: The U.S. life insurance
experience has shown that a secular
improvement in life expectancy has kept the
market profitable.
• Customer Engagement: Deliver
segmented customer driven products that
leverage trust generated through
transparency. Co-pay is an integral Competencies for a healthy health insurance industry
innovation from the US perspective
• Dynamic Pricing: Dynamic, market-based
pricing is often the key enabler for Key Action points for the Indian Market
innovation in any given industry hence the
Product Innovation
Channel Distribution
Risk Management
Build an Build expertise in Strong processes
regulators shall provide ample scope of innovative set of managing retail governed by a
doing this. core health channels and stringent
insurance bolster their monitoring body
• Removing Supply Distortions: Broad products and an approach to that periodically
participation across different grades of array of ancillary distribution by evaluates the
products and improving their tested and
service offering and geographies is critical to services. branding and reinvented models
the growth of robust heath services. marketing. with regards to
latest conventions.
Therefore it is important to make the
industry more inclusive.
Source: Mckinsey 9

10. Indian Health Insurance: Key Issues and root cause analysis w.r.t stakeholders
Insurance Companies
Health Care providers
TPAs
Macro Issues for the Industry

11. Standard mediclaim
policy across all
customer segments
Different
Prices
charged
by
different
hospitals
Low
level
of
consumer
Limited
influence
over
healthcare
awareness
Claims
>
Premium
delivery
mechanism
Collec3on
(Rs 6,991vsRs 6,734
crore)
High
claim
ra3o
No
incen3ve
for
the
insured
to
be
vigilant
on
billing
Sources
http://businesstoday.intoday.in/bt/story/5874/1/the-cashless-insurance-row.html

12. Lack
of
process
interac3on
amongst
insurance
companies
and
hospitals
Lack
of
standardiza3on
and
High
discount
demand
accredita3on
norms
for
from
insurance
healthcare
providers
companies
Limited
Market
reach
and
Lack
of
purchasing
delay
in
payments
power
and
Health
insurance
Mul3ple
contracts
with
penetra3on
in
differen3nsurance
companies
3er2/3
ci3es
Irregular
and
un3mely
payments
by
insurance
companies

13. Lack
of
standardiza3on
&
accredita3on
in
most
healthcare
facili3es
leading
to
Limited
influence
over
healthcare
difficulty
in
judging
the
delivery
network
authen3city
and
procedures
Lack
of
standardized
opera3ng
procedures
Limited
funding
support
from
the
insurance
company
Delays and issues in
impac3ng
the
claims
claims processing
disbursement
3me
leading to negative
perceptions by insurance
companies & consumers
about TPAs

14. Insufficient
data
on
Indian
consumers
&
disease
paMerns
Poor
check
on
pricing
and
resul3ng
in
difficulty
in
product
service
quality
development
and
pricing
BeMer
Quality
of
Health
Care/Coverage
at
lower
prices
Mindset
–
cost
considered
as
a
burden
Limited
medical
Nega3ve
percep3ons
–
low
level
of
consumer
infrastructure
awareness
14

15. Suggestions
Grading of Hospitals and Products
Integrated Standard Operating Procedures
Surprise Audit and Customer Feedback
Co-pay
Channel Distribution:Reach out to “Bharat”

16. Getting ready for Product Innovation: Grading of Hospitals and Products
Every customer has access to all network hospitals Industry Comments
irrespective of the premium paid
 The problem is that there is a standard mediclaim
policy across all customer segments, it is only the
Standard sum insured that varies. As a result, a policyholder
with a sum insured of Rs 1 lakh and another
mediclaim policyholder with Rs 5 lakh would get the same
policy across A large portion of the population below the age of amount reimbursed for a Rs 40,000 procedure at a
45 left untapped (Preventive > curative) top-end hospital,”
all customer  “In cities like Mumbai and Delhi, most of the
segments policyholders are keen on being treated in only the
top four hospitals. This is why there has been so
much objection to the preferred provider network,”
Higher claims which lead to hiking of policy Source: http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/Cos-plan-to-segment-
insurance-mkt-to-ensure-cashless-facility/articleshow/6160895.cms
premiums
Recommendations Opportunity for Cognizant Potential Implications
 Grade hospitals into dynamic classes (periodically revised) on  Development of a dynamic grading  Lowering of claim values for low
the basis of system that can take into account premium accounts
– Level of service offered customer feedback and other key  Enabling better service providers to
performance variables charge a premium
– Pricing
Key Enabler  Clear identification of high value
– Presence across multiple cities
 Co-operation amongst service customers
 Create a diverse product portfolio with new health insurance
providers and insurance companies to  Better coverage across demographics
products based on
set price slabs for different procedures and regions
– Desired level of service and treatments varying in line with the
 Increased penetration of health
– Availability Co-pay option service provider’s grade
insurance
– Availability of preventive care options
 Stimulate competition amongst players
to strive for better service offering
16

17. Risk Management through Integrated Standard Procedures
key issues
INS  Absence of an integrated operating platform for
INS INS multiple parties which leads to high turn around
Co-1 Co-2 Co-3 time and poor service delivery
 Negligible understanding of customer’s past
record and health history
 High administration costs which translate into
higher premiums for the consumer
 Lack of internal controls leading to operating
TPA
IRDA risks like
- Over billing
Consumer - Delayed payment receipt
SP -2 SP -1 SP -3
- Poor service
Recommendations Opportunity for Cognizant Potential Implications
 Consolidation of multiple players from service provider and insurance  Development of a linking operational • Improved performance of all parties in terms
into two representative bodies to enable platform for all parties with UIDAI or a of service quality and turn-around time
– Standard terms & conditions across industry Credit Information Bureau of India • Reduced administration and processing
(CIBIL) like platform costs
 Establish a regulatory body with members from IRDA and AIMA to
 Establishment of progressive Standard • Effective risk control across processes
– Establish Standard operating procedures for Health Insurance
Operating procedures • A key input for grading service providers
– Ensure compliance and efficient service • Elimination of multi-party bargaining and
Key Enabler
 Create an industry wide web based operational platform to enable contracts which led to confusion
 Co-operation amongst service
– Link all the parties involved through a single channel • Development of a co-operative model,
providers and insurance companies to
critical for evolution of the health insurance
– Seamless communication amongst parties involved integrate their processes industry as a whole
– Clear establishment of authority and responsibility
17

18. Risk Management: Surprise Audit and Customer Feedback
Problem definition
Service Points Rank  Lack of focus on quality as far as Heath
Provider Care service providers are concerned.
ABS 290 1  Absence of reliable rankings of service
providers for the customers to choose the
Audit Scores GSF 265 2 best options
 Lack of incentive for Health Care Providers
BFG 210 3 to improve the quality of their service.
 Dominance of few players with financial
Data Processing TCB 190 4 muscle to advertise heavily which has led to
Center the cartelization of the healthcare industry
at the top
Ranking published on web and
Customer insurance ads across platforms
Feedback
Recommendations Opportunity for Cognizant Potential Implications
 Enable the regulatory body with members from IRDA and AIMA to  Creation and maintenance of a  Well established controls on operating
– Administer a panel of independent Doctors appointed by IRDA for dynamic customer feedback system procedures
regular audit of the claim cases at various hospitals that generates rankings for service  An important source of information for
providers. insurance company to negotiate on
– The team shall be responsible for random checking and
authentication of various bills and claims made from a hospital Key Enablers terms of strategic partnerships
– Mandatory audit of bills above 1.5 lacs post redemption of claims  Establishment of a strong and well  Competition amongst service providers
represented independent body to offer better service quality
– For default, if any, hospitals must be penalized for triple the
amount of excessive charged plus an effect on the overall grade  Establishment of integrated Standard  Transparent evaluation of service
Operating Procedures across industry quality for the consumer
 Customer feedback on website
 Creation of a compliance mechanism
– Secure customer feedback on service satisfaction for different
with clearly defined rewards and
service providers through internet, audit surveys and data
penalties
collected on the touch point of bill payment.
18

19. Product Innovation & Customer Engagement through Co-Pay
You have mild fever but Industry Comments
may be we should get a
CT Scan done
 Consumers fail to remain vigilant on the
prescribed treatment in view of a cash-less
insurance facility
 The IRDA chief said his information bureau,
where all mediclaim reports were archived,
showed that while average charges for a
medical procedure under the
reimbursement category was Rs 25,000, the
Loss for Insurance Rising premiums on same went up to Rs 33,000 in cashless
companies insurance policies scheme.
Don’t worry, I Source: http://economictimes.indiatimes.com/personal-finance/
have a cash less insurance/insurance-news/Insurers-set-10-day-cashless-deadline/
articleshow/6239744.cms
health insurance.
Let’s get it done
Recommendations Opportunity for Cognizant Potential Implications
 All the state insurance companies should introduce health  Provide Market Intelligence services to  Reduction in over-billing by healthcare
insurance policies with a Co-pay option in order to the insurance companies, critical for providers
– Promote rational usage of insurance cover rational product innovation in the  An incentive for the consumer to
Indian context. ensure rational spending on healthcare
– Reduce possibility of the hospitals overcharging
Key Enablers  Expanded market because of relatively
– Improve coverage through relatively less premiums
 Product innovation on part of the state lower premium
 What is Co-pay?
owned insurance companies  Expansion of the product portfolio
– A policy option whereby the customer is bound to pay a small
 A standardized system to link co-pay  A check on the rising health insurance
percentage of the total bill by his own pocket
percentages with premium paid cost in the long run
– The percentage is small enough to secure the interest of
consumer
– Consumer gets the insurance at a relatively lower premium
19

20. Channel Distribution: Reaching out to “Bharat”
Industry Comments
Inadequate and inefficient sales and marketing • India’s general insurance business accounts for
manpower in the form of agents just 0.6 percent of the gross domestic product
(GDP), compared to the world average of 2.14
percent. India ranks 136th on penetration levels
Huge and lags behind China (106), Thailand (87),
Underutilization of channels such as PSU banks, untapped Russia (86)
SHG’s and other NBFC’s with extensive penetration
market • The penetration of general insurance in India
remains low on account of low consumer
preference, largely untapped rural markets and
constrained distribution channels
Low usage of technology in expanding penetration
in the market Source: Crisil & Assocham
Recommendations Opportunity for Cognizant Potential Implications
 Investing in a robust sales workforce  Development of a performance  Reduction in distribution cost which
– Efficient hiring, training and performance management process management and training system to will lead to wider market reach
manage the sales workforce.  A comprehensive measure to check the
– Usage of web technology to constantly track, test and train
 Development and integration of selling sales force performance which will act
employees
web and mobile platforms with those as an impetus for further growth of
 Strategic tie-ups with other organizations
of partner organizations. insurance companies
– Securing tie-ups with Banks, NBFC’s, NGO’s and organizations
Key Enablers  Reduction in total cost of healthcare
like ITC e-Choupal.
 Penetration of Broadband and 3G services on account of better
 Focus on e-selling and m-Selling participation
technology into Tier II and Tier III
– Creating advanced selling platforms to enable sales through web cities.  Increase in awareness about insurance
and mobile phones. with large number of channels
 Strategic tie-ups amongst major
insurance and financial services
players. 20

21. Thank You
21

22. 1. CII, K. (2008). Health Insurance Inc: The Road Ahead. Health Insurance Summit 2008, (p. 18). Mumbai.
2. Ehrbeck, T., & Kumra, G. Sustainable Health Insurance. McKinsey & Company, Inc , Healthcare Payors and
Providers Practice . McKinsey & Company, Inc .
3. ICICI. (n.d.). Tips for Insurance Card Holders. ICICI Prudential Life Insurance Brochure . India: ICICI
Prudential.
4. KPMG & CII. (2008). (p. 31). Mumbai: KPMG, CII.
5. Levitt, T. (2004). Marketing Myopia. Harvard Business Review .
6. Lombard, ICICI. (n.d.). Popularizing Cashless Hospitalization. Delhi, Delhi, India.
7. Rao, K. S. (2008). Financing and Delivery of Health Care Services in India. New Delhi: Commission on
Macroeconomics and Health, Govt of India.
8. Singhal, S. (2007). Sustainable Health Insurance : Global perspectives for India. McKinsey & Company, Inc .
New Delhi: McKinsey & Company, Inc , FICCI.
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23. 23

24. 24

25. 25

26. 26

27. Acknowledgement
We are extremely grateful to the organizing team of Chanakya, 2010 at Indian Institute of
Management, Indore for their great support and help throughout the event. We would like to
express our gratitude to Cognizant for mentoring the event and making it a great learning
experience for us.
Nitin Pahuja Ujjawal Jain
email@nitinpahuja.com ujjawaljain@gmail.com
09884070606 09962082884
27