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Think Tank: The Geneva Association - India: Social insurance schemes in the social media era

Source: Asia Insurance Review | Dec 2015

In this article extracted from The Geneva Association’s newsletter, Dr S Jayaprakash of Nanobi Data and Analytics, Bangalore, discusses India’s evolution in terms of population growth and the challenges it faces in bridging the gap between the growing need for health-care infrastructure and social insurance. He provides suggestions on how to bridge that gap and explores how the recently promoted social insurance schemes have performed and the ways in which they can be improved. 
India today has a competitive edge in many respects. It is expected to overtake China by 2050 as the country with the world’s largest population. 
   The positive side of this demographic trend is the enormous manpower potential it creates; however it also creates a major challenge in terms of providing health care for its citizens and promoting social insurance.
Many welfare measures
India is a socialistic state; the government has introduced many welfare measures for its citizens such as free medicine, free treatment in government hospitals and some degree of old-age pension. 
   It also provides money to the family members of pension beneficiaries who die due to a natural calamity, or accidents that have occurred due to inadequate government regulation, for example, railway and road accidents, accidents due to poor road infrastructures, epidemics, etc. 
Extended family system decline
In the earlier part of the 20th century, India had a strong “joint family” system whereby dependents of deceased persons were cared for by the other family members. 
   With the growth of urbanisation, many families have split up for economic and logistic reasons, and slowly India is witnessing the death of this joint family system. Ambitious plans by the Narendra Modi government to build 100 smart cities is going to further intensify this urbanisation trend.
Directionless direction
Many people living below the poverty line (BPL) have very uncertain futures and live from hand to mouth. Their access to health-care facilities is very limited due to various factors such as lack of a daily income, poor doctor–patient ratio, poor hospital bed ratio, etc. 
   The National Health Profile 2015 recently released by the Central Bureau of Health Intelligence paints a grim picture, in particular with regard to the longevity of common, poor citizens. Here are some highlights:
• India considers infrastructure an important indicator for understanding its health-care policy and welfare mechanism, yet with one government hospital bed catering to approximately 1,833 patients, the data is not favourable.
• India has not reached its ambitious goal of spending 2% of GDP on health care. Instead, health spending is dwindling: statistics show that, in 2011–12, the share of total public expenditure on health was 35%, and fell to 33% in 2012–13 and to 30% in 2013–14.
• Out-of-pocket expenditure has increased steadily over the years. The rising awareness of diseases has led to more diagnoses as well as increased expenditure on medicines, consultations, etc. 
• Non-communicable diseases in India are on the rise: heart disease (24%), cancer (6%) and diabetes (2%) are now the leading causes of mortality in India. 
• The increase in pollution is taking a significant toll: nearly 3,000 deaths in 2014 were related to acute respiratory infection (ARI).
   Hence, the longevity of poor people is a big question mark. These people do not have access to any form of insurance. Some families are lucky to receive money from the government for family members whose death happens to be due to a form of accident or epidemic, as mentioned earlier in this article.
   At this juncture, insurance is deemed to be one of the best risk-mitigating mechanisms for the masses. 
   Though the Insurance Regulatory and Development Authority of India (IRDAI) stipulates that all insurance companies must comply with a minimum percentage of rural coverage, there has still not been any significant impact even 16 years after the liberalisation of the insurance sector. Hence, the government has brought out a major insurance scheme under the banner “Pradhan Mantri Insurance Scheme”.
About the Pradhan Mantri insurance scheme 2015
Insurance is not only a form of risk management but also a mechanism to protect the economy. Even after liberalisation in 1999, insurance penetration hovers around 3.9% of GDP, which is far behind the world average of 6.5%.
   In India, insurance continues to be sold, not bought. Unless the population has had previous experience with insurance, it does not understand the importance of it. 
   This may change thanks to the government’s initiative to introduce the Pradhan Mantri Jeevan Jyoti Bima Yojana, which offers life insurance coverage of INR200,000 (US$3,000) at a premium of INR330 (US$5) per annum for those aged between 18 years and 50 years, and the Pradhan Mantri Suraksha Bima Yojana, which is an accident insurance plan at a premium of INR12 per annum for the age group 18–70. 
   The government has also introduced “Atal Pension Yojana”, which offers a fixed monthly income of between INR1,000 and INR5,000 during old age depending upon the contributions. Comparatively, because poor people have less longevity, the government has designed these low-premium high-benefit plans to maximise penetration to these segments.
   In 2014, before the introduction of these schemes and to improve financial inclusion, the government announced the “Jan Dhan Yojana” bank account scheme with the objective of bringing many people into the banking fold. 
   Rules for enrolment were relaxed. Motivational factors were attached to this account, such as subsidy credit, loan credit, a RuPay card with free accident insurance coverage of INR100,000, and more. 
   Despite these benefits, official statistics show that only 155.9 million accounts have been opened and of these, 85 million held zero balance as of 13 May 2015. This means that about 50% of these accounts are yet to be operational. So, mere numbers do not mean financial inclusion.
Making the insurance scheme work well
Insurance schemes may suffer a similar fate as the Jan Dhan scheme if some amount of flexibility is not exercised at this point. 
   While the banking scheme aimed at financial inclusion, the insurance schemes, because of factors such as inadequate health infrastructure, larger numbers of dependents, more urbanisation, etc. have higher significance for poor people. Hence, some suggestions for improving the reach of these schemes are provided here.
   For starters, these schemes do not have any great subsidy component, which means that the premium may fluctuate year after year depending on experience. Also, the target age group of 18–50 years for life insurance could be a cause of concern, as people in this age group are generally confident about experiencing higher, normal longevity. But all would be unsure of accidental death and hence want to get insurance for it. 
   Already the majority of people may have “missed the bus”; the government announced that they were waiving the health declaration requirements for people who avail themselves of these schemes before 31 August 2015. 
Targeted age group more keen on accident insurance than life or pension covers
But there is not much reach despite such motivational factors, as statistics show. As of 31 August 2015, 112.8 million insurance and pension schemes were bought: 84 million for accident insurance, 27 million for life insurance and a mere 729,000 for pension. This means that people are already aware of accident cover and are buying it, while policies for life insurance and for pension are not very popular. 
   It should be noted that not all the distribution channels were showing enough interest to promote the scheme, as the commission is small when compared to the work involved. It has to be made clear that, though the government brought this out as a social measure, not all the channels took it as such, but rather as a commercial measure, leading to lesser penetration than expected. 
Extend the product to older people
To bring more people under the insurance net, extending the product design would be a good move. Charging extra premium for older categories, without denying insurance, could be an option. Proper controls can cut losses.
   Bringing higher age groups under insurance also has a sociological angle to it. These days, many families struggle with paying for themselves and taking care of their children’s needs such as education and marriage. Big financial challenges come up after a person turns 55. Charge them an extra premium, but allow participation. This will increase the population base.
   In an era of statistical advancements in analytics at reasonable costs, use fraud analytic techniques to spot possible fraud patterns and create a system of mobile phone alerts to avoid frauds.
   Insurers should understand that the government is enabling the population to experience insurance. Hence, it is important for insurers to leverage more cross-selling and up-selling of regular insurance schemes. For example, selling simple general insurance schemes such as home insurance or jewellery insurance will help cross-subsidise any losses arising from the government schemes in the long run.
Conclusion – Bridging the gap
Insurance in India is about creating awareness so that people can buy. There is no dearth of social media activists, social media coverage, etc in India. What we lack now is bridging the gap so as to promote such social insurance schemes to bring more people under the insurance net, which will also reduce the burden on the government.
   There are lot of health-care start-ups and also a lot of venture capital funding going on in India’s health-care space; one key element to retain in all these ventures is to promote social insurance schemes through social media for more enrolment and to cover more poor people within the health-care net, which will also reduce the claims in the accident and life insurance portfolio.
   While many social insurance schemes have been launched in the past but have failed to achieve their objectives, the current government has taken good steps to make sure that its policies work. The waiving of the health declaration requirements for three months up to 31 August 2015 was a step in the right direction towards bridging the gap. 
   At this juncture, the government should consider extending not only the deadlines but also include other age brackets as well with necessary controls and also try to leverage on the emerging start-up culture to make these schemes reach out to the masses.
Dr S Jayaprakash is co-founder and vice-president of Nanobi Data and Analytics, Bangalore. 
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