The Indian health insurance industry is experiencing rapid growth, with increasing premiums and a rising number of policyholders. However, beneath the surface, there are concerns that the system is becoming inefficient and prioritizing profits over patient care. The Medical Loss Ratio (MLR), which measures the percentage of premiums spent on patient claims, is a key indicator of an insurance system’s efficiency. In India, the MLR is alarmingly low, with some companies spending as little as 58% of premiums on medical care.
An analysis of the financial disclosures of standalone health insurance companies in India reveals that a significant portion of premiums is being absorbed by commissions, administration, and management overhead. For example, Star Health Insurance spent 15% of premiums on commissions and 17% on management expenses, while Care Health Insurance spent 20% on commissions and 22% on management expenses. This leaves a relatively small amount for actual medical care.
In contrast, global benchmarks suggest that at least 80-85% of premiums should be spent on patient care. In countries like the US, Germany, France, and the Netherlands, regulatory measures are in place to ensure that administrative and sales costs are capped, allowing the bulk of contributions to flow towards treatment.
The Indian health insurance industry’s focus on selling policies rather than funding care has led to a breakdown of trust between customers, hospitals, and insurers. Patients are often forced to pay out of pocket or battle for approvals, despite paying rising premiums. To address this issue, regulators must set MLR thresholds, forcing insurers to spend at least 80-85% of premiums on patient care. Additionally, costs of customer acquisitions and management expenses must be reduced to single digits.
The article concludes that the Indian health insurance industry needs to shift its focus from aggressively selling policies to transparently funding care. Unless efficiency improves and regulations enforce higher MLR thresholds, the promise of health insurance will remain unfulfilled, leaving patients and hospitals short-changed. The industry must prioritize funding healthcare over corporate profits and move towards a more transparent and patient-centric model.