In India the health insurance penetration is 4 per cent for the individual policies, however, penetration is 12 per cent including employer-employee and government-sponsored health insurance schemes. Considering all the elements of the insurance ecosystem in India and the roadmap we all envision for the next 5 or 10 years, it is not far-fetched to think that employer-employee insurance is going to be very important. This is one segment that will contribute to increasing the health insurance penetration in India.

Taking a closer look at this category unravels more benefits than what appears at first glance.

Family health insurance without cost surely is a welcome feature for the employees. Employers happily go for this to secure the health of the employees and their families and also arrest their financial erosion due to health emergencies. Established process for processing health insurance claims and ready ecosystem across hospitals, TPAs, and insurers makes the experience seamless. Currently, employer-employee health insurance is worth Rs 16000 - Rs 18,000 crores per annum.

Why Do Companies Opt for Employer-Employee Group Health Insurance?

The main reason for employers providing this insurance is to ensure that their employees can handle medical emergencies without worrying about the costs involved. This peace of mind increases employees’ motivation and engagement with their work. Another benefit for employers is that they get to attract top talent and oust competition on this front. Health insurance benefit is surely an important consideration for the employee while choosing the employer. Due to portfolio underwriting, insurers allow to waive waiting periods for various degenerative ailments, pre-existing ailments, etc, so the coverage is enriched for the employees and their family members which are not available in the retail health insurance.

Benefits under the health insurance policy are not taxable in the employee's hand due to reimbursement nature and the insurance cost is booked as expenses by the employer. Hence it works in favor of both parties.

These are the main reasons that have driven companies to opt for employer-employee group health insurance.

Is Employer-Employee Group Health Insurance Beneficial for Insurers?

Employer-Employee Health insurance has been a tricky business for insurers. While the average premium per policy has been very high for this segment and it supports the cash flow of the insurers, the portfolio performance has been unfavourable with claims more than the premium collected.

Despite bleeding portfolio, insurers have been aggressively pursuing this category due to the following reasons:

1. The lumpsum premium for better cash flow
2. Higher NWP (No or less ceding to Reinsurance)
3. Management of the portfolio by careful selection of groups designing optimum covers
4. Claims cost control through direct engagement with hospitals for bulk business.

Why Do Insurers Want?

Higher average premium and portfolio approach, which makes this category lucrative for insurers. Most insurers have portfolios that consist of profitable categories like asset insurance, liability insurance, and transit insurance. The profits from these product segments help to offset the losses from loss-making products like employer-employee health insurance, ensuring overall sustainability. None of the insurers want to miss out on this segment because of the volumes and market coverage.

Traditionally, insurers have been underwriting group insurance products as cross-subsidized for medium and large enterprise clients. The premium amounts were always very high and lucrative.

Challenges to Insurers

With changing lifestyles, economic and social environment, insurers are grappling with the following challenges concerning employer-employee health insurance -

The advancement of medical technology has increased the average cost of hospitalization over the years, availability of better health care facilities has directed the consumers to choose better hospitals over the local nursing homes irrespective of the medical necessity, medical inflation, lifestyle changes have increased the frequency of hospitalizations, the unprecedented pandemic situation has surpassed all estimates of frequency and severity of claims, absence of regulations for price standardization for treatments/procedures, increased competition leading to price wars and inability to correct the pricing, and building a sustainable portfolio.

Challenges to Employers

Employee Health insurance has been a standard with most medium to large enterprises. MNCs also adopt their global insurance program in their local operations. Now small enterprises including the VC-funded startups have been patronizing this benefit for the employees to attract and retain talent.

Some of the most common challenges faced by employers are the risk of increasing premium due to their higher claims experience, Industry claims experience, medical inflation, etc., optimization of covers to contain the cost leads to employee dissonance, the disconnected experience between the stakeholders like an insurer, TPA, and hospital in absence of a common technology interface, and unavailability to best covers for smaller groups

The Road Ahead

This is a rising category and provides an immense opportunity to the industry to work together to make sure all the stakeholders, employee, employer, and the insurer are not losing.

Careful designing of the insurance covers based on the employee demographics, existing claims experience, etc will ensure the cover is optimum at a reasonable cost.

The introduction of participatory policies through features like co-pay, payment by employees for the additional covers, etc will be a win-win approach.

There is tremendous opportunity to cater to all the insurance needs of the employees such as Topup health, Critical Illness, Home insurance, Motor insurance, Life & Accident insurance, etc through the digital fulfillment journey at the employer’s intranet/employee portal.

The author is Founder Director and Principal Officer, Riskcovry

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.