The widening healthcare protection gap is a real risk for Asian countries, and one which needs to be addressed immediately to ensure economic and social stability.
Asia’s health protection gap, which Swiss Re estimates stands at around $1.8tn, is a cause of concern for many insurance executives and policymakers in the region. The largest health protection gaps are in China ($805bn) and India ($369bn) – their large populations and lower aggregate income levels driving the gaps in both markets.
The large health protection gap in both countries leads to high out of pocket medical expenses of 30% and 65% respectively in both China and India. These are much higher in comparison to mature markets, whose out of pocket spending stands at approximately 15%. In places like Myanmar, out of pocket spending can reach up to 74% of total healthcare expenses, while the likes of Indonesia, Cambodia and the Philippines also display out of pocket expenditures of more than 50%, according to the World Health Organisation.
The high levels of personal medical spending could cause financial stress, for example leading to families having to sell their house in order to afford treatment. Indeed, it has the potential to adversely affect economic growth and social stability as a whole. And given the ageing societies in many Asian markets and high medical inflation rates, the protection gap is only going to become wider if urgent action is not taken.
It certainly requires a multi stakeholder approach in order to make a difference, but the insurance industry can certainly take the lead to effect change. Below are just four ways to do so.
Not surprisingly, public spending on healthcare continues to grow vigorously, driven by a variety of factors from the rise of an emerging middle class, the increase in ‘lifestyle diseases’ such as diabetes, and the growing healthcare needs of an ageing population.
There are constraints as to how much governments can allocate additional public money to cater to rising healthcare expenditure, and hence the bulk of the health risk would increasingly need to be shared with the private sector. It is crucial that the overall share of out of pocket expenditures be reduced, especially as the average per capita health expenditure continues to grow unabated. And indeed, insurance remains the most plausible way to limit out of pocket expenditures.
Hence, insurers should continue to engage governments to find ways in which private health insurance can be made compulsory for as many people as possible. This could be in the form of either individual plans, group policies or a combination of both. And often those who miss out on being covered work in the informal sector - which in many countries constitute the bulk of the working population. This, alongside the rise of the gig economy, leads to the need to devise tailored solutions so as to include as many people into the insurance fold.
Simple products for basic access
According to Swiss Re, as many as 40m households in Asia cannot afford treatment. The health protection gap leaves many families particularly vulnerable, and hence offering families simple health insurance products can go a long way in building a baseline of resilience.
For instance, the regulator in India is also pushing for a standard health insurance product which will have the basic mandatory covers and will be uniform across the market. Such standard products cannot be combined with critical illness or benefit based covers.
In order to make products simpler and priced at an affordable level, insurers would invariably have to reduce their cost ratios. In this regard, technology and the InsurTech sector play an important role in helping insurers become more efficient.
Closing the gap for chronic conditions
Chronic diseases and conditions are on the rise worldwide, with rapid urbanisation leading to more people adopting a more sedentary lifestyle. This has contributed in pushing obesity rates and cases of diabetes upwards. According to the WHO, chronic diseases are expected to rise to 57% by next year with the emerging markets set to bear the brunt of it.
Traditionally, those with chronic illnesses or pre-existing conditions may not qualify for coverage or may simply not be able to afford the higher premiums. However, insurers are increasingly finding ways to be more inclusive and provide innovative solutions for illnesses such as diabetes and cancer.
For instance, Thailand’s Muang Thai, together with Swiss Re, developed a diabetes disease management solution – which is a dynamic pricing product designed to adjust the premium level as the customer’s health condition improves.
Insurers are aware of the fact that some of these chronic diseases can be effectively managed through lifestyle changes, and are keen to build in such modifiable factors into their product design. With increased access to connected healthcare devices, it is increasingly viable to track someone’s insulin or cholesterol level and provide a discount on their premiums based on their personal readings.
The top three chronic conditions in Asia are hypertension, diabetes and high cholesterol. Devising products that focus on these lifestyle-related chronic illnesses can make a significant difference in addressing the health needs of Asian consumers.
Incentivising personal health and well-being
With the proliferation of chronic diseases, health systems and insurance plans cannot sustain the current diagnose and treat model. As such, insurers and governments need to incentivise better management of personal health in order for the system to be remain viable.
Services which insurers have provided range from health assessment and tracking, active health improvement services such as smoking cessation plans and gym membership subsidy, wellness programmes that rewards customers for living healthily, genomics testing that predict the risk of developing certain diseases, video consultations with doctors and easy access to medical specialists.
Health insurers in Asia will have to continue to find innovative ways to drive lifestyle changes leading to healthier outcomes, in order to stay ahead of escalating healthcare costs. Championing preventive healthcare is indeed better and cheaper than cure. And as insurers benefit from a healthier pool of policyholders, they can continue to offer insurance at affordable rates and hence attract more people into the insured fold. A