Academic journal article IUP Journal of Management Research

Impact of Socioeconomic Factors on Purchase Decision of Health Insurance: An Analysis

Academic journal article IUP Journal of Management Research

Impact of Socioeconomic Factors on Purchase Decision of Health Insurance: An Analysis

Article excerpt

Introduction

India's healthcare industry is the largest sector in terms of employment and revenue generation. Healthcare is defined as "hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment" by ibef.org. While India continues to chart a course towards modernity and economic development, 40% of the Indians still remain outside the purview of available modern healthcare benefits. The Indian healthcare industry had reached US$160 bn in 2017 and expected to reach US$280 bn by 2020, on account of the increasing demand for specialized and quality healthcare facilities.

The Indian government is spending 1.2% of GDP for the financial year 2018 on the healthcare sector. The new health policy has set a goal to rise to 2.5% by 2025. It could reduce out-of-pocket spending from 70% to 63%. New schemes named the Ayushman Bharat Program and The National Health Protection Scheme were announced by the Union finance minister in a budget meeting in 2018. Health insurance scheme will be covering 10 crore families with ^5 lakh per family and cover approximately 50 crore members. The fund allocation in the previous financial year (2017) was ^47,353 cr, and in the current financial year (2018), the fund allocated is to the tune of ^52,800 cr, an increase by 11.5%. It is a leading indicator for development of the healthcare sector and health insurance sector in India.

Insurance density is measured as the ratio of premium (in USD) to the total population. Non-life insurance density during 2007-08 was 6.2, and during 201617, it was 13.2; the cumulative growth rate was 7.85%. On the other hand, health insurance density during 2007-08 was 1.09, and during 2016-17, it was 3.56; the cumulative growth rate was 12.55%. Health Insurance business performance is better than non-life business.

Insurance penetration is measured as the ratio of premium (in USD) to GDP (in USD). Non-life insurance penetration during 2007-08 was 0.6 and 2016-17 was 0.77, the cumulative growth rate was 2.53%. On the other hand, health insurance penetration during 2007-08 was 0.1055 and 2016-17 was 0.2075, the cumulative growth rate was 6.99%. Health insurance business was outperforming the nonlife business. The data shows that there exist significant demand and vast potential for the growth of health insurance industry in India. While health insurance has historically played a significant role in developing the healthcare sector in the developed nations, the Indian scenario presents a different picture as less than 15% of the population is covered under some form of insurance (employer's contribution, or self-financed or government-sponsored schemes) and only 2.2% of the population was covered under private insurers.

Health insurance in India began with the Employees' State Insurance Scheme (ESIS) in 1952 introduced by the Central government to protect and provide social security to the worker population in an establishment. Then in 1954, the government, in order to protect its own employees, started the Central Government Health Scheme (CGHS) in 1954. In 1986, four General Insurance Companies, that were set up as PSUs, introduced various types of ^edi-Claim' policies and were made available to the general public. The IRDA allowed private players to enter into the arena in 2000 which led to an increased penetration of health insurance schemes on a national level. In addition to this, many of the state governments, like Andhra Pradesh, Karnataka, Kerala and Tamil Nadu, started their own health insurance for the people below the poverty line. The Union Labor Ministry introduced health insurance (RSBY) for the unorganized labor population. Thus, the public sector insurers' average 63% market share between 2005 and 2014 declined from 76 to 61%, whereas the private insurers had an average share of 29%, and the stand-alone insurers had an average of 8% during the same period. The total of various categories of the population covered under the health insurance schemes was 21. …

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