After growing at 25 per cent annually for almost a decade, the insurance sector slowed in the past year. There was controversy, too, with insurers accusing hospitals of overcharging. Analjit Singh, chairman, CII Insurance Committee, and chairman of Max India, which is into healthcare and insurance, tells Joydeep Ghosh & M Saraswathy that health insurance premiums need to catch up with healthcare costs. Edited excerpts:
Do you think there are gaps between the Insurance Regulatory and Development Authority (Irda) and the industry?
There’s a systemic lacuna, not individual. The industry has done very well by growing at 25 per cent annually for a decade, with the exception of last year. But 24 companies, just on the life insurance side, are too many. These can be segregated into three or four buckets. There is (government-owned) Life Insurance Corporation, bank-led insurance companies, private players like us with their own money and risk-based capital invested in the business, and others who’re there because their capital and returns on capital are protected. Given the different kinds of people, there is a lot of difference in the way people look at the industry.
Second, there was mis-selling in the past three to four years. When such things happened, the regulator, by virtue of a regulator’s character, clamped on it.
Among the 24 players, not all are there for the life insurance business. Many of these have entered with an industrial approach. Their failure makes things look bad. If you take the top eight-nine companies out, I do not think any of the top brass of those (other) companies have ever been to a CII or Ficci meet. I am only saying that because that’s not their core business.
After Irda imposed tough guidelines on Ulips (unit-linked insurance products), the industry has gone into a slowdown. What is the way forward?
Customers were used to buying insurance products that were more participatory in nature. The Indian ethos is, if I put some money in something, I must get something back. One has to look at insurance from the long-term perspective. Life insurance is built over 20 to 30 years, the gestation period of a life insurance business. For healthcare, the gestation period is 10 years. These are very long gestation businesses. They defy the usual yardsticks of people entering and exiting businesses.
IPO (initial public offering) guidelines for insurance companies have been deferred several times. Why?
IPO guidelines can’t come till the foreign direct investment (FDI) limit is increased to 49 per cent. In the current conditions, if they are announced, the foreign party will end up with higher shareholding than the Indian one. If the 49 per cent FDI is announced, then you will see the IPO guidelines coming up. I have heard this will come soon.
General insurers and hospitals have been at loggerheads on charges. You have a hospital chain, as well as a general insurance company. What has gone wrong?
Today, the imbalance is due to low premiums and not high pricing. Max Healthcare, after 10 years, has gone in the black. I don’t think we are so inefficient to have got it wrong for over 10 years.
There was no standalone, vertical-based pricing for health insurance. General insurers went to secure fire, marine and theft businesses; health was additionally thrown in. Today, standalone health insurance companies and healthcare companies are talking about true costs. The health insurance premiums and tariffs (rates) in India are the lowest in the world. We have to be careful that healthcare companies don’t start to overcharge. But, today, the balance is tipped against healthcare providers. If you were to buy both hospitalisation and outpatient health insurance, you can’t buy it all at just Rs 2,000. You don’t even get a pair of shoes at this price.