28 June, 2012


Legal News & Analysis – Asia Pacific – Hong Kong – Insurance & Reinsurance – India – Insurance & Reinsurance


The opportunities in the healthcare insurance industry in Asia were emphasised throughout the Conference. For example, healthcare insurance is already the largest growing sector of non-life insurance in India and this is likely to be the case throughout the Asia region.
According to various speakers, healthcare insurance opportunities have arisen as a result of government reforms (privatisation and changes in regulation), economic growth, growing populations, an emerging middle class in Asia and government focus on underprivileged classes and their (government’s) social contract to provide healthcare for the masses, paucity and inadequacy of public health, increasing medical costs, increase in lifestyle diseases (particularly in China where obesity has increased substantially with the economic growth of the past decade) and current low penetration of healthcare into the poorer parts of the countries.  
Globally, improvements in healthcare quality and resultant increase in life expectancy are forcing governments to increasingly focus on the underprivileged often rural classes at the expense of the emerging middle class. As a result, governments are exerting pressure on their populations to take out healthcare insurance as a way to take pressure off government’s own healthcare systems.
A further growth opportunity for the healthcare insurance industry is the spending gap between increasing Gross Domestic Product (GDP) and the amount of government healthcare spend. In India for example there is likely to be a large spending gap by 2020, healthcare financed by insurance is projected to be around US$13 billion and the amount of healthcare spend not financed by insurance is projected to be around US$207 billion – a gap of some US$200 billion. This is seen as a huge opportunity for healthcare insurance to emerge as a viable mechanism to fill the funding gap. In  addition, increasing GDP leads to an increase in discretionary spending by the middle classes who are increasingly spending their salaries on healthcare particularly in aging markets or markets with poor or scarce public health resources.
In India there is an increased focus on how healthcare insurance can be managed. Something that was stressed throughout the conference was the requirement to innovate whether it be by developing new products, using social media to increase the exposure of healthcare insurance or developing regulation – innovation was seen as key to maximising the potential of healthcare insurance in the Asian markets. Innovations suggested included:
(a) no maximum age;
(b) bulk discount/ group discount;
(c) loans to finance premiums; and
(d) customising policies to suit the target market.
In innovating, however, the industry should take into account the opinions of the four stakeholders in healthcare insurance: (i) insurers and their distributors; (ii) service providers including hospitals and TPAs; (iii) customers/policyholders; and (iv) the regulator. 
Innovation could also be used to tackle the perceived industry wide issues in healthcare, including disease management, long term care and expert opinions. Most speakers discussed rationalising cost of treatment.
Online presence for healthcare insurers was also considered a key area although any online presence should not be maintained solely for marketing purposes but also for information purposes and such an online presence should be combined with a network of intermediaries.
Changing regulation
In India, for example, IRDA (the regulator) wishes for health insurance to be made available not just to the middle classes but also for products to be developed that can be used by those in a less fortunate position. IRDA has also stressed a requirement for health insurance that is actually useful to the customer. A number of commentators saw healthcare insurance not just as a part of general insurance but as a stand alone specialty and urged regulators to regulate it as such. However, it was stressed that all regulatory changes should be consistent and constant. 
Further discussions surrounded standardisation not just of regulation of products but also the regulation of facilities available throughout the region and/or each country. It was suggested that hospital providers and healthcare insurance should be regulated by a dual “healthcare regulator”. Obviously there are various issues with this suggestion but it is worth bearing in mind that healthcare insurers are of the opinion that some regional regulators are not shaping the insurance regulatory environment in their jurisdictions with healthcare at the forefront of their thinking.
Fraud concerns
In the US there are some estimates that fraud is costing the healthcare industry 6% or USD 120 billion out of USD 2 trillion annual healthcare expenditure. In India in comparison health insurance fraud is not regarded as a criminal act (socially that is not legally) and there is no strong deterrent in respect of abuse of the healthcare insurance industry either, although it is costing the industry money.
A number of common methods were discussed in respect of detecting potential fraud: (i) distribution – multiple policies from a single address, vague address, income/ premium inappropriateness, selective purchase in family, agent with track record of fraud; and (ii) on the claims side – site visit raises suspicions, reimbursement claims from an in-network hospital, distance between policy holder and hospital, suspicious documents, repeated admissions/ admissions in same family, claims raised in last month of policy etc.
In order to mitigate the risk from fraud and abuse it was suggested that insurers should:
(i) on the distribution and underwriting side – profile agents by monitoring individual portfolios, identify fraud “hot zones” for more rigorous monitoring of proposals, regularly analyse underwriting impact and refine underwriting rules and guidelines;
(ii) on the provider contracting side – strengthen contracting and limit provider network. Shift to package rates; and
(iii) on the claims side – have adequate procedures in place with built-in administrative and clinical alerts and a well trained claims team attuned to discrepancies to aid detection.
In addition a zero tolerance environment for fraud or abuse facilitated by agents or employees should be practiced and the insurer should have in place dedicated teams to investigate frauds and to assist law enforcement.Finally, it was thought that healthcare insurers should engage insurance regulators and consumer bodies to set up some kind of regional healthcare counter fraud practice group to improve standards of practice around fraud prevention in the healthcare space.



For further information, please contact:

William Tsang, Partner, Clyde & Co
Kendall Evans, Clyde & Co


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