A RESEARCH STUDY ON HEALTH

INSURANCE

PROJECT SUBMITTED TO UNIVERSITY OF MUMBAI FOR

PARTIAL COMPLETION OF THE DEGREE OF MASTER IN

COMMERCE UNDER THE FACULTY OF COMMERCE

BY PRANALI SUNIL PASHILKAR

ROLL NO:-

Under the Guidance of

Prof. SHRADDHA BHOME

SATISH PRADHAN DNYANSADHANA COLLEGE OF COMMERCE

THANE, 400-603

Certificate
This is to certify that Ms PRANALI SUNIL PASHILKAR has worked and duly completed
his project work for the degree of Master in Commerce under the faculty of
Commerce in the subject of Project Management and her project entitled “TO
STUDY ON HELTH INSURANCE” under my supervision. I further certify that the entire
work has been done by the learner under my guidance and that no part of it has
been submitted previously for any Degree of Diploma of any University.

It is her own work and facts reported by her personal findings and investigations.
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Principal M.Com Coordinator

Prof: HEMNAT KUMAR Prof. SHRADDHA BHOME

Internal Guide

Prof. SHRADDHA BHOME External Examiner

Declaration by learner.
I the undersigned MS PRANALI SUNIKL PASHILKAR hereby declare that
the work embodied in this project work entitled “TO STUDY ON HALTH
INSURANCE ” form my own contribution to the research work carried out under the
guidance of PROF. SHRADDHA BHOME is a result of my own research work and has
not been previously submitted to any other university for any other Degree/Diploma.

Wherever reference are has been made to previous works of others, it has been
clearly indicated as such and included in bibliography.

I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical conduct

PRANALI SUNIL PASHILKAR

Name and Signature of the Learner

Certified by

PROF.SHRADDHA BHOME Name and Signature of the Guiding Teacher

Name and Signature of the Research Guide

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 Acknowledgment
To list who all have helped me is difficult because they are so numerous and
the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of the project.

I take the opportunity to thank the University of Mumbai for giving me

chance to do the project.

I would like to thank my Principal PROF HEMANT KUMAR for providing

the necessary facilities required for completion of the project.

I take this opportunity to thank our Co-ordinator Prof. SHRADDHA

BHOME for the moral support and guidance.

I would also like to express my sincere gratitude towards my Project guide Prof.
Shraddha Bhome whose guidance has made the project complete and successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

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 Table Of Content
Introduction to Insurance...........................................................................................................3
Contract of Insurance.................................................................................................................4
Health Insurance.........................................................................................................................6
History of health insurance.........................................................................................................6
Health Care Scenario in India....................................................................................................9
Health Insurance in India.........................................................................................................12
Classification of Health Insurance Scheme..............................................................................13
Market-Based Systems....................................................................................................14
Employer Based Schemes..............................................................................................21
Central Government Health Scheme (CGHS).................................................................24
NGOS / Community-Based Health Insurance.................................................................26
Health Insurance Initiatives by State Governments.................................................................31
Health Insurance Policy............................................................................................................32
Procedure Followed in Settlement of Claims..........................................................................37
Third party administrators (TPA’s)..........................................................................................43
Future of Health Insurance.......................................................................................................44
Conclusion................................................................................................................................46

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List of Tables:

Table Topic Page

no. num
ber
1 Socio Economic Indicators 10
2 Achievement of India in Health Sector 11
3 Percentage of total health expenditure funded through public/social 12
insurance and direct government revenue
4 Health Insurance Coverage in India 14
5 Percentage growth in gross premium in insurance companies in 2003-05 16
6 Premium Collection from health insurance segment 20
7 Existing infrastructure under ESIS in India 22
8 Public insurance schemes 24
9 Non-profit social insurance schemes in India 27

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 Introduction to Insurance

“Insurance is a protection from risk as the man is perennially

exposed to risk”.

Life may stop suddenly with a heart attack. The house may unexpectedly catch fire
and be gutted the crop may be lost by vagaries of nature, draught, disease or flood. The
motor car may be badly damaged in a road accident, thus, risk of different kinds resulting in
loss are inevitable in life. Insurance provides an answer by providing protection to persons
from such contingencies.

Insurance is a coverage by contract where by one party (insurer) agree to

indemnify or guarantee another (insured) against loss by a specified contingent event or
peril and or an unfortunate event. The aim of all types or classes of insurance is to afford
protection to the insured from the risk, which he apprehends or anticipates. The
protection from insurance is available to the insurer not in preventing the event
happening but in indemnifying the insured from the loss he has sustained. Insurance is
a major component of the financial sector. It is a risk transfer mechanism, whereby an
insured transfers a risk exposure to an insurer in consideration for the payment of
premium.

Health care insurance or health insurance is a contract between a policyholder and a third-
party payer or government program to reimburse the policyholder for all or a portion of the
cost of medically necessary treatment or preventive care provided by health care
professionals. The subject matter of insurance is PROPERTY, PREMIUM, and LIABILITY.

Function of Insurance

The function of insurance is two folds. In the first instance it transfers or shifts a risk
from one individual to a group and secondly, the losses are shared, on some equitable basis
by all members of the group. Insurance is a device where-by the risk of financial loss
accruing from death or disability, or damage to, or destruction of property owing to perils to
which they are exposed is passed on to another. The insurer, of course, collects an agreed rate
of contribution from a large number of people and relieves the insured partly, if not wholly,
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from the effects of loss by paying the insurance money.

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 Contract of Insurance

A contract of insurance is an agreement whereby one party called the Insurer

undertakes, in return for an agreed consideration, called the Premium, to pay the other party
namely, the Insured a sum of money or its equivalent in kind, upon the occurrence of
specified event resulting in loss to him.

The Policy is a document, which is an evidence of the contract of insurance. The contract of
insurance is governed by the law of contract as embodied in the Indian Contract Act,1872.
All insurance contracts must have the following five essential elements in order that they
may be legally enforceable.

a. Offer and acceptance: The person who wants to take up cover against
particular perils offers his risk through a proposal form to the insurance
company.

b. Consideration: The premium paid is the consideration and on its receipt by

the insurance company the contract of insurance comes into force.

c. Consensus Ad Idem: The parties to the contract must be of the same mind and
there should be a complete and unbiased agreement between the insurer and the
insured regarding the terms of the contract. The intention of the insured should
have been clearly understood by the insurance company.

d. Capacity to Contract: Both the parties must be legally compete nt to enter into
an agreement. The parties to the contract should not be of unsound mind. They
must have attained the age of majority and should not have been declared as
insolvent.

e. Legality of the Object of the Contract: The purpose for which the agreement is
entered into should be legal and not opposed to public policy.

Basic Principles of Contract of Insurance

i. Insurable Interest

A contract of insurance does not undertake to prevent the occurrences of the peril
insured against. What it provides is a promise to make good the financial loss caused by the
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operation of the insured peril.

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 ii. Utmost good faith

Law requires both the parties to the contract to observe good faith, which means absence
of fraud. Insurance contracts are subjected by law to a higher duty namely of utmost good
faith. The proposer has a duty to disclose to the insurer all material facts which he knows and
which he ought to known. A material fact is a fact which affect the judgment of a prudent
underwriter deciding whether to accept the risk and if so, at what rate of premium and subject
to what terms and conditions.

iii. Indemnity

Indemnity means compensation for loss or injury. It also means security or protection
against loss or damage. Insurance contracts promise to make good the loss or damage
limiting it to the amount of loss or damage subject to the sum insured.

iv. Subrogation and Contribution

Subrogation is defined as the transfer of right and remedies of the insured to the insurer
who has indemnified the insured in respect of the loss.

v. Proximate Cause

The object of insurance is to provide indemnity not for any loss but only for such losses as
are caused by insured perils. The perils insured are clearly stated in the policy and the
liability of the insurer arises only if the loss is caused by these perils.

Classification of Insurance

Insurance business is broadly classified into

Life Insurance and

General Insurance (or non- life insurance) business

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General insurance business is broadly under the following heads:

1. Property Insurance – Fire, theft, Engineering and miscellaneous accident

Motor Insurance.

2. Liability Insurance – Employees liability, public liability, products liability and

professional indemnity, pecuniary Insurance’s, fidelity guarantee credit
insurance.

3. Personal accident and health Insurance.

4. Crop & cattle insurance.

5. Marine insurance.

Health Insurance

Health insurance has become a necessity in today’s world considering the rise in the
cost of medical care and treatment and the huge population of the country. The escalating
cost of medical treatment today is beyond the reach of the common man. Even if an
individual is healthy and has never had any major problem, it is not possible to predict
what may happen in the future. There is a growing public awareness for better health care
and desire to have better health care from private medical providers. In case of a medical
emergency, cost of hospital room, doctor’s fees, medicines and related health services all add
up to a huge sum. In such times, health insurance provides the much needed financial relief.

History of health insurance

Introduction

Some people think of health insurance as a recent development in human history. But
concern for financial loss resulting from accident and illness can be traced to ancient
civilizations. Health insurance, limited primarily to disability income in case of accident
existed in the early history of Rome. This tradition continued in Europe in the Middle Ages,
and by the 17th century there were laws providing sickness insurance for seamen and
dismemberment insurance for soldiers.

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Health insurance today is a broad array of coverage providing for the payment of benefits as
a result of sickness and injury. It includes insurance for losses from medical expense,
accident, disability, and accidental death and dismemberment (AD&D).

Expansion and Growth of Individual Health Insurance

Pre-World War I

The trend toward broadened coverage continued in the early part of the century. For example,
insurers extended disability provisions from 26 weeks to 52 weeks and then to 104 weeks; in
1913 they introduced lifetime disability benefits. Insurers also begin writing policies that they
had to renew, with premium rates that the insurers could not raise. At the same time, adverse
conditions existed. The policies had heavy restrictions and there was no cooperation among
the insurers to improve the condition of the insurance business.

Trends and Developments: 1918-1940

The health insurance business experienced little growth in the years immediately
following World War I. The collapse of the stock market in October 1929, followed by the
Great Depression, affected the health insurance industry greatly. Loss ratios climbed in the
field of sickness disability coverage’s. Accidental death and monthly indemnity risks were a
staggering source of loss. The industry’s problems were compounded by improper
underwriting and inadequate premiums resulting from insufficient claim experience.

During and after the Depression, a new era of health insurance began. Some of the
innovations and changes that were introduced in the 1930s included:

1. Emphasis in private insurance on reimbursement for hospital, surgical and medical

expenses.

2. Introduction of blanket accident expense policies.

3. Introduction of coverage for the entire family.

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 Growth Years: 1940-1960

After World War II, health insurance as a whole entered a period of dynamic growth
exceeding that of any other form of insurance. People were looking for broad coverage and
guaranteed benefits and to meet this need the individual health industry expanded hospital
and medical expense policies and made greater use of renewal guarantees.

The beginning of a new decade in 1950 witnessed the continued growth and expansion of the
individual health insurance industry. Contributing to the expansion was an increasing public
awareness of the staggering loss of national income from accident and sickness.

In 1956 the US Congress established the Social Security Disability Insurance (SSDI)
program. It also enacted two health insurance program, Medicare for the elderly and
Medicaid for the poor.

Individual Health Insurance Today

Changes in individual health insurance evolved in response to customer needs, cost

containment activities and legislative mandates.

Starting in the 1950s individual health insurance for various expenses incurred for medical
care became more readily available for persons under age 65. Private insurers now offer
individual comprehensive coverage, integrating basic and major medical coverage in a single
policy with a deductible and with an unlimited maximum benefit.

Emerging Trends

Insurers have developed health insurance products to reflect changes in the

socioeconomic environment. Both the range of benefits and the scope of coverage have
increased to meet changing needs.

Managed care, which is fast becoming the leading form of health insurance delivery,
integrates the financing and delivery of appropriate health care services. Providers in
managed care plans offer standardized health services to enrollees at set costs that generally
are lower than traditional fee- for-service arrangements.

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 Health Care Scenario in India

Introduction

The health care system in India is characterized by multiple systems of medicine,

mixed ownership patterns and different kinds of delivery structures. Public sector ownership
is divided between central and state governments, municipal and Panchayat local
governments. Public health facilities include teaching hospitals, secondary level hospitals,
first- level referral hospitals (rural hospitals), dispensaries; primary health centers (PHCs),
sub-centers, and health posts. Also included are public facilities for selected occupational
groups like organized work force (ESI), defense, government employees (CGHS), railways,
post and telegraph and mines among others. The private sector (for profit and not for profit)
is the dominant sector with 50 per cent of people seeking indoor care and around 60 to 70
per
cent of those seeking ambulatory care (or outpatient care) from private health facilities.
While India has made significant gains in terms of health indicators - demographic,
infrastructural and epidemiological (See Tables 1 and 2), it continues to grapple with newer
challenges. Not only have communicable diseases persisted over time but some of them like
malaria have also developed insecticide-resistant vectors while others like tuberculosis are
becoming increasingly drug resistant. HIV / AIDS have of late assumed extremely virulent
proportions. The 1990s have also seen an increase in mortality on account of non-
communicable diseases arising as a result of lifestyle changes. The country is now in the
midst of a dual disease burden of communicable and non communicable diseases. This is
coupled with rising health costs, high financial burden on the poor and erosion in their
incomes. Around 24% of all people hospitalized in India in a single year fall below the
poverty line due to hospitalization (World Bank, 2002). An analysis of financing of
hospitalization shows that large proportion of people; especially those in the bottom four
income quintiles borrow money or sell assets to pay for hospitalization (World Bank, 2002).

This situation exists in a scenario where health care is financed through general tax
revenue, community financing, out of pocket payment and social and private health
insurance schemes. India spends about 4.9% of GDP on health. The per capita total
expenditure on health in India is US$ 23, of which the per capita Government expenditure
on health is US$
4. Hence, it is seen that the total health expenditure is around 5% of GDP, with breakdown of
public expenditure (0.9%); private expenditure (4.0%). The private expenditure can be
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further

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classified as out-of-pocket (OOP) expenditure (3.6%) and employees/community financing
(0.4%). It is thus evident that public health investment has been comparatively low.

In fact as a percentage of GDP it has declined from 1.3% in 1990 to 0.9% as at present.
Furthermore, the central budgetary allocation for health (as a percentage of the total Central
budget) has been stagnant at 1.3% while in the states it has declined from 7.0% to 5.5%.

Table 1. Socioeconomic indicators

Land area 2% of world area
Burden of disease (%) 21% of global disease burden
Population 16% of world population
Urban : Rural 28:72
Literacy rate (%) 65.38
Sanitation (%) Rural – 9.0; Urban – 49.3
Safe drinking water supply (%) Rural – 98; Urban – 90.2
Poverty (%) Below poverty line – 26
Rural – 27.09; Urban – 23.62
Poverty line (Rs.) Rural – 327.56; Urban – 454.11

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 Table 2. Achievements: 1951- 2000
1951 1981 2000
Demographic changes
Life expectancy 36.7 54 64.6 (RGI)
Crude birth rate 40.8 33.9 (SRS) 26.1 (99 SRS)
Crude death rate 25 12.5 (SRS) 8.7 (99 SRS)
Infant mortality rate 146 110 70 (99 SRS)
Epidemiology
Malaria 75 2.7 2.2
(cases in million)
Leprosy cases pe 10,000 38.1 57.3 3.74
population
Small pox (no of cases) >44,887 Eradicated
Guinea worm (no. of cases) >39,792 Eradicated
Polio 29709 265
Infrastructure
SC/PHC/CHC 725 57,363 1,63,181 (99-RHS)
Dispensaries & hospitals (all) 9209 23,555 43,322 (95–96-
CBHI)
Beds (Pvt & Public) 117,198 569,495 8,70,161 (95-96-
CBHI)
Doctors (Allopathy) 61,800 2,68,700 5,03,900 (98-99-
MCI)
Nursing personnel 18,054 1,43,887 7,37,000 (99-INC)

In light of the fiscal crisis facing the government at both central and state levels, in the
form of shrinking public health budgets, escalating health care costs coupled with demand for
health-care services, and lack of easy access of people from the low- income group to quality
health care, health insurance is emerging as an alternative mechanism for financing of health
care.

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 Health Insurance in India

Health insurance can be defined in very narrow sense where individual or group
purchases in advance health coverage by paying a fee called "premium". But it can be also
defined broadly by including all financing arrangements where consumers can avoid or
reduce their expenditures at time of use of services. The health insurance existing in India
covers a very wide spectrum of arrangements and hence the latter- broader interpretation of
health Insurance is more appropriate.

Health insurance is very well established in many countries. But in India it is a new concept
except for the organized sector employees. In India only about 2 per cent of total health
expenditure is funded by public/social health insurance while 18 per cent is funded by
government budget. In many other low and middle income countries contribution of social
health insurance is much higher (see Table 3).

Table 3. Percentage of total health expenditure funded

through public/social insurance and direct
government revenue
Country Social Health Government Budget
Insurance
Algeria 37 36
Bolivia 20 33
China 31 13
Korea 23 10
Vietnam 2 20
India 2 18
Source: As cited in Naylor et al.2002

It is estimated that the Indian health care industry is now worth of Rs. 96,000 crore
and expected to surge by 10,000 crore annually. The share of insurance market in above
figure is insignificant. Out of one billion population of India 315 million people are estimated
to be insurable and have capacity to spend Rs. 1000 as premium per annum. Many global
insurance companies have plans to get into insurance business in India. Market research,
detailed planning and effective insurance marketing is likely to assume significant

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importance. Given the health financing and demand scenario, health insurance has a wider
scope in present day situations in India. However, it requires careful and significant effort to
tap Indian health insurance market with proper understanding and training.

The above graph shows sharp rise in the penetration of the Health Insurance in India after
1999. This was due to the policy change by IRDA (Insurance regulatory and
development board of India) and private players were allowed to enter the health
insurance segment.

Classification of Health Insurance Scheme

There are various types of health coverage in India. Based on ownership the existing
health insurance schemes can be broadly divided into categories such as:

Market-based systems (private and

voluntary) Employer based
insurance schemes
Member organization (NGO or cooperative)-based
systems Government or state-based systems

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 The health care demand is rising in India now days. It is estimated that only 10 per cent of
health insurance market has been tapped till today. Still there is a scope of rise up to 35
percent in near future.

Market-Based Systems
1. Mediclaim scheme

The government insurance companies started first health insurance in 1986, under the name
mediclaim; thereafter Mediclaim has been revised to make it attractive product. Mediclaim
is a reimbursement base insurance for hospitalization. It does not cover outpatient
treatments. First there is used to be category-wise ceilings on items such as medicine, room
charges, operation charges etc. and later when the policies were revised these ceilings were
removed and total reimbursements were allowed with in the limit of the policy amount. The
total limit for policy coverage was also increased. Now a person between 3 months to 80
years of age can be granted mediclaim policy up to maximum coverage of Rs. 5 lakh against
accidental and sickness hospitalizations during the policy period as per latest guidelines of
General Insurance Corporation of India. This scheme is offered by all the four subsidiary
companies of GIC. Mediclaim scheme is also available for groups with substantial discount
in premium. The table 4 below indicates the share of various forms of health coverage in
India.

Table 4:

Health insurance coverage in India

Schemes Beneficiaries (In
million)
The Employees State Insurance Scheme (ESIS) 25.3
Central Government Health Scheme (CGHS) 4.31
Railways Health Scheme 8
Defense employees 6.6
Ex-servicemen 7.5
Mining and plantations (public sector) 4
Health insurance (Public sector non- life companies) 10
Health insurance (Private sector non- life companies) 0.8

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Health segment of Life insurance companies (Public 0.232

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 and private sector)
State sponsored schemes <0.5
Employer run facilities/reimbursement schemes of 6
private sector
Employer run facilities/reimbursement schemes of <8
public sector
Community health schemes 3
Total ~85
Source: Gupta and Trivedi

The current statistics on health insurance indicate that out of 1 billion population only about
2 million of population is covered by Mediclaim scheme. The reason for lack of popularity of
this scheme could be several. The health insurance products are generally complicated and it
is suggested that GIC and its subsidiary companies who deal in non-life insurance market
which is dominated by mandated insurance such as accident, fire and marine, do not have
expertise in marketing health insurance and therefore this scheme is not popular. Health
insurance also represents very small percentage of overall business of GIC and its
subsidiaries hence they have also not focused their attention in this area. The GIC companies
have little interest and mean to monitor the scheme. It should also be recognized that because
of technicalities of health service business there are number of cumbersome rules which have
hampered the acceptance of the scheme. It is also reported that in number of cases the
applicants of older ages have been refused to become member of mediclaim scheme due to
unnecessary conservatism of the companies.

Another area of less popularity of the Mediclaim is the lack of appropriate marketing
efforts in selling these products. To popularize the schemes it is important that proper
marketing is done. To make the scheme more acceptable government has exempted the
premium paid by individuals from their taxable income. This provides 20-40% subsidy on
the premium to taxpayers.

Mediclaim has provided a model for health insurance for the middle class and the rich. It
covers hospitalization costs, which could be catastrophic. But given the premium is on higher
side it as remained limited to middle class, urban tax payers segment of the population. There
are also problems and negative unintended consequences of this scheme. There are reported

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fraud and manipulation by clients and providers, which have implications for the growth and
development of this sector. The monitoring systems are weak and there are chances that if the
doctor and patient collude with each other, they can do more harm to the system. There is
also element of adverse selection problem as the scheme is voluntary. As the scheme
reimburses charges without limit it also will pushed up the prices of services in the private
sector.

How successful has Mediclaim been in India from a business perspective? While the details
on the performance of the Mediclaim in its early years are not available, during 1999-2000,
the last year before the entry of private companies, some 2.3 million Mediclaim policies
were sold, adding up to a total health premium of Rs. 200 crores. (Gina Singh, 2001)4. With
the entry of the private players, the health business has also increased sharply. The health
premium has shown an impressive eight- fold growth in the last five years reaching Rs. 1732
crores in 2004-05. This statistics clearly reflects the contribution of the health segment to the
overall growth of insurance sector; while insurance sector is growing as a whole, the health
segment is contributing to this growth to a great extent.

The table 5 below indicates, in the year 2003-04, the gross premium of health segment
increased by 35 percent compared to 19 percent in Motor insurance and 7 percent in Fire
insurance; for the public sector companies at least, the health insurance segment has shown
the most growth. During 2004-05, health insurance segment continued to top the list,
however at a slower rate of 28 percent.

Table 5:

Percentage growth in gross premium in insurance companies in 2003-05

2003-04 2004-05
Insurer
Fire Marine Engg. Motor Health Total Fire Marine Engg. Motor Health Total
Public -3.33 -13.32 -4.44 13.46 28.89 6.56 -1.46 2.85 4.31 9.30 17.79 5.43
sector
New - -21.90 18.79 8.06 54.92 3.17 2.54 -2.31 -3.71 8.23 27.33 4.38
India 10.97
National -1.63 -13.14 - 29.73 42.36 18.27 3.05 34.93 4.68 19.02 26.28 11.94
19.62

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United 4.67 -11.32 -6.46 3.87 10.85 3.33 -6.69 -18.57 10.42 -7.79 5.24 -3.77
India
Oriental -1.62 -4.01 -7.03 12.28 7.87 1.02 -5.61 10.00 5.87 14.80 6.85 7.31
Private 63.58 120.85 43.51 86.67 130.32 67.40 28.70 48.56 60.48 70.39 114.21 57.35
sector
Total 6.57 -3.92 3.94 18.66 35.13 12.30 5.39 10.22 17.85 16.13 27.91 12.73

There are many other new products developed by the GIC viz;

a. Bhavishya Arogya Policy, with a single sum insured. It is a deferred treatment plan
for long term health care of old age. The sum insured can be enhanced in multiples of
Rs. 10,000 starting from Rs. 50,000 on wards at a cost of 20% an additional
premium, four years before the commencement of the retirement age.

b. Senior citizens unit plan (SCUP)- launched as a joint venture plan of the unit trust of
India and the New India Assurance company, which is linked to an annuity
retirement plan, providing hospitalization benefit up to Rs. 5 lakhs. It is a combined
limit of life time for investors and their spouse.

c. Cancer insurance, limited to members of the Indian cancer society. Another cancer
policy is cancer Insurance policy for the member of cancer patients Aid
association.

2. Private Insurance schemes

a) Bajaj Allianz:
Bajaj Alliance offers three health insurance schemes namely, Health Guard, Critical
Illness Policy and Hospital Cash Daily Allowance Policy.

The Health Guard scheme is available to those aged 5 to 75 years (not allowing
entry for those over 55 years of age), with the sum assured ranging from Rs 100
0000 to 500 000. It offers cashless benefit and medical reimbursement for
hospitalization expenses (preand post- hospitalization) at various hospitals across
India (subject to exclusions and conditions). In case the member opts for hospitals
besides the empanelled ones, the expenses incurred by him are reimbursed within 14
working days from submission of all the documents. While pre-existing diseases are

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excluded at the time of taking the policy, they are covered from the 5th year onwards
if the

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policy is continuously renewed for four years and the same has been declared while
taking the policy for the first time. Other disco unts and benefits like tax exemption,
health check- up at end of four claims free year, etc. can be availed of by the
insured.

The Critical Illness policy pays benefits in case the insured is diagnosed as suffering
from any of the listed critical events and survives for minimum of 30 days from the
date of diagnosis. The illnesses covered include: first heart attack; Coronary artery
disease requiring surgery: stroke; cancer; kidney failure; major organ transplantation;
multiple sclerosis; surgery on aorta; primary pulmonary arterial hypertension, and
paralysis. While exclusion clauses apply, premium rates are competitive and high-sum
insurance can be opted for by the insured.

The Hospital Cash Daily Allowance Policy provides cash benefit for each and every
completed day of hospitalization, due to sickness or accident. The amount payable per
day is dependant on the selected scheme. Dependant spouse and children (aged 3
months – 21years) can also be covered under the Policy. The benefits payable to the
dependants are linked to that of insured. The Policy pays for a maximum single
hospitalization period of 30 days and an overall hospitalization period of 30/60
completed days per policy period per person regardless of the number of
confinements to hospital/nursing home per policy period.

The other scheme provided includes Silver health policy, Health insurance
policy, Star Package policy, etc.

b) ICICI Lombard:
ICICI Lombard offers Group Health Insurance Policy. This policy is available to
those aged 5 – 80 years, (with children being covered with their parents) and is given
to corporate bodies, institutions, and associations. The sum insured is minimum Rs 15
000/- and a maximum of Rs 500 000/-. The premium chargeable depends upon the
age of the person and the sum insured selected. A slab wise group discount is
admissible if the group size exceeds 100. The policy covers reimbursement of
hospitalization expenses incurred for diseases contracted or injuries sustained in
India. Medical expenses up to 30 days for Pre-hospitalization and up to 60 days for
post- hospitalization are also admissible. Exclusion clauses apply. Moreover,

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favorable claims experience is recognized by discount and conversely, unfavorable
claims

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 experience attracts loading on renewal premium. On payment of additional premium,
the policy can be extended to cover maternity benefits, pre-existing diseases, and
reimbursement of cost of health check-up after four consecutive claims- free years.
The Various plans provided are: Health Advantage Plus Insurance, Family Floater
Plan, etc.
c) Royal Sundaram Group: The Shakthi Health Shield policy offered by the Royal
Sundaram group can be availed by members of the women’s group, their spouses
and dependent children. No age limits apply. The premium for adults aged up to 45
years is Rs 125 per year, for those aged more than 45 years is Rs 175 per year.
Children are covered at Rs 65 per year. Under this policy, hospital benefits up to Rs
7 000 per annum can be availed, with a limit per claim of Rs 5 000. Other benefits
include maternity benefit of Rs 3 000 subject to waiting period of nine months after
first enrolment and for first two children only.
d) Cholamandalam General Insurance: The benefits offered (in association with the
Paramount Health Care, a re- insurer) in case of an illness or accident resulting in
hospitalization, are cash- free hospitalization in more than 1 400 hospitals across India,
reimbursement of the expenses during pre- hospitalization (60 days prior to
hospitalization) and post- hospitalization (90 days after discharge) stages of treatment.
Over 130 minor surgeries that require less than 24 hours hospitalization under day
care procedure are also covered. Extra health covers like general health and eye
examination, local ambulance service, hospital daily allowance, and 24 hours
assistance.

There are many other private insurers also. The data of the premium collection of the
various health insurance companies is given in the table 6 below:

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 Table 6
Premium Collection from health insurance segment

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 From the above table it can be seen that there is a great boost in the premium
collection from the health insurance segment.

Employer Based Schemes

1. Employee State Insurance (ESI) Scheme

Under the ESI Act, 1948 ESI Scheme provides protection to employees against loss of wages
due to inability to work due to sickness, maternity, disability and death due to employment
injury. It also provides medical care to employees and their family members without fee for
service. When implemented for the first time in India at two centers namely Delhi and
Kanpur simultaneously in February 1952, it covered about 1.2 lakh employees. Presently the
scheme is spread over 22 states and Union territories across India covering 91lakh employees
and more than 350 lakh beneficiaries. The Act compulsorily covers: (a) all power using non-
seasonal factories employing 10 or more persons; (b) all non-power using factories
employing 20 or more employees and (c) service establishments like shops, hotels
restaurants, cinema, road transport and news papers are covered. ESIC is a corporate semi-
government body headed by Union Minister of Labor as Chairman and the Director General
as chief executive. Its members are representatives of central and state governments,
employers, employees, medical profession and parliament.

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The financing of the scheme is done by Employees State Insurance Corporation (ESIC)
which is made up of contributions from: (a) employees who contribute at the rate 1.75 per
cent of their wages (if daily wage is Rs.25 or less, his contribution is waived); (b) employers
who contribute at the rate of 4. 75 per cent of total wage bills of their employees to
contribution on behalf and for employees having daily wage ofRs. 25 or less; and (c) State
Governments contributes 12.5 per cent of total shareable expenditure worked out by
prescribed ceiling on expenditure which is Rs. 600 per insured person per annum and
expenditure incurred outside/over and above the prescribed limit.

The State Government runs the medical services of this scheme of social insurance meant for
employees covered under the ESI Act 1948. This scheme - compulsory and contributory in
nature - provide uniform package of medical and cash benefits to insured persons is
implemented through special ESI hospitals and diagnostic centers, dispensaries and panel
doctors. The existing facilities under the ESIS are provided in Table 7.

The delivery of medical care is through service (direct) system and/or panel (indirect)
system. It provides allopathic medical care, but medical care by other systems like ayurvedic
and homeopathy in the states is also provided as per the state government decision. The
medical care consists of preventive, promotive, curative and rehabilitative types of services
are provided by the scheme through its own network or through arrangements with reputed
government or private institutions by concept of proper referral system and regionalisation.

Table 7. Existing infrastructure under

ESIS in India
Particulars
No. of Centers 632
No. of Insured Persons/Family 84,45,000
Units
ESI Hospitals 125
Number of ESI Hospital Beds 23,334
ESI Dispensaries 1,443
Insurance Medical Officers 6,220
Insurance Medical Practitioners 2,900

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Preventive services include immunization, maternal and child health, family welfare services.
Promotive services include health education and health check- up camps. Curative services
include: dispensary care, hospital care, maternity care, supportive services including
diagnostic centre, drugs, dressings, surgical procedures, dental care, prosthesis and other
appliances. Rehabilitative services include: physical rehabilitation, economical rehabilitation,
and provision of artificial aids (social, psychological rehabilitation).

Even though the scheme is formulated well there are many problem areas in managing this
scheme. Some of the problems are:

Large number of employers try to avoid being covered under the scheme,

A large number of posts of medical staff remains vacant because of high turnover and
lengthy recruitment procedures,

There is duality of control,

Rising costs and technological advancement in super specialty treatment,

Management information system is not satisfactory.

There is low utilization of the hospitals

The workers are not satisfied with the services they get.

In rural area the access to services is also a problem.

Some of the state governments have to subsidize the scheme heavily even though the ESI
Corporation, which is the financial arm of the system, has much surplus funds. All these
problems indicate an urgent need for reforms in the ESI scheme (Vora, 2000).

Some of the options for reforms in ESI scheme could be: making the scheme autonomous-
managed by workers and employers while government only retails controls through a
guiding framework as is the case with German Sickness Funds. Secondly the scheme should
be made open for non-organized sector through fixed income based contribution. This will
extend the benefits of the scheme to many more people. The government should set the
patient care standards and monitor outcomes as well as patient satisfaction. The management
of the health
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facilities also needs to be improved substantially. The financial management of the scheme
also needs improvement.

Central Government Health Scheme (CGHS)

Since 1954, all employees of the Central Government (present and retired); some
autonomous and semi- government organizations, MPs, judges, freedom fighters and
journalists are covered under the Central Government Health Scheme (CGHS). This scheme
was designed to replace the cumbersome and expensive system of reimbursements (GOI,
1994). It aims at providing comprehensive medical care to the Central Government
employees and the benefits offered include all outpatient facilities, and preventive and
promotive care in dispensaries. Inpatient facilities in government hospitals and approved
private hospitals are also covered. This scheme is mainly funded through Central
Government funds, with premiums ranging from Rs 15 to Rs 150 per month based on salary
scales. The coverage of this scheme has grown substantially with provision for the non-
allopathic systems of medicine as well as for allopathy. Beneficiaries at this moment are
around 432 000, spread across 22 cities.

The CGHS has been criticized from the point of view of quality and accessibility. Subscribers
have complained of high out-of-pocket expenses due to slow reimbursement and incomplete
coverage for private health care (as only 80% of cost is reimbursed if referral is made to
private facility when such facilities are not available with the CGHS).

Table 8. Public insurance schemes

ESIS (Employees State CGHS (Central Government
Insurance Scheme) Health Scheme)
Contribution Employees: 4.75% of wages. Pay/pension Contribution
Employers: 1.75% of wages. (Rs/month) (Rs/month)
All contributions are deposited <3,000 15
by the employer. 3001–6000 40
State governments contribute a 60001–10000 70
minimum of 12.5 %on ESIS 10001–15000 100
expenditures in their >15000 150
respective States (Garg 1999b, The bulk of resources (85%)

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 p. 30). See also section 59A come from general revenues
(Govt. of India, 1999g, pp. 51- of the Central Government
52) (Garg 1999b, p. 34)

Reimbursement Does not allow reimbursement 1. Reimbursement of

of medical treatment outside consultation fee, for up to
of allotted facilities. For four consultations in a total
example, the Employees State spell of ten days (on
Insurance Act 1948 states that referral)
entitlement to medical benefits
does not entitle the insured to 2. Cost of medicines.
‘claim reim bursement for
3. Charges for a maximum of
medical treatment except
ten injections.
under regulations’ (Govt. of
Reimbursement for specified
India, 1999g, p. 50) and ESI
diseases or ailments.
(General) Regulations, (Govt.
of India, 1999g, p. 156)
Entitlement Depending on ‘allotment’ as 1. First- level consultation
per the ESI Act and preventive health care
1..Outtpattiientt mediicall service through
carre att diispensarriies orr dispensaries and hospitals
panell clliiniics,, under the scheme
2. Consultation with specialist
2. Consultation at a CGHS
and supply of special
dispensary / polyclinic or
medicines and tests in
CGHS wing at a
addition to outpatient care;
recognized hospital.
3. Hospitalization, specialists,
drugs and special diet.
3. Treatment from a
4. Cash benefits: Periodical
specialist through referral,
payments to any insured
emergency treatment in
person in case of sickness,
private hospitals and
pregnancy, disablement or
outside India.

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 death resulting from an
employment injury.
Eligibility Employees (and dependants) Employees of the Central
working in establishments Government (excepting
employing ten or more persons railways, Armed Forces
(with power) or twenty or pensioners and Delhi
more persons (without power) Administration), pensioners,
and earning less than Rs. 6 widows of Central
500 per month. (Garg 1999a, Government employees,
p.85) Delhi Police employees,
Defence employees and
dependants residing in 24
specified locations (See
Govt. of India, various
publications)

NGOS / Community-Based Health Insurance

Community-based funds refer to schemes where members prepay a set amount each year for
specified services. The premia are usually flat rate (not income-related) and therefore not
progressive. Making profit is not the purpose of these funds, but rather improving access to
services. Often there is a problem with adverse selection because of a large number of high-
risk members, since premiums are not based on assessment of individual risk status.
Exemptions may be adopted as a means of assisting the poor, but this will also have adverse
effect on the ability of the insurance fund to meet the cost of benefits.

Community-based schemes are typically targeted at poorer populations living in

communities, in which they are involved in defining contribution level and collecting
mechanisms, defining the content of the benefit package, and / or allocating the schemes,
financial resources (Such schemes are generally run by trust hospitals or nongovernmental
organizations (NGOs). The benefits offered are mainly in terms of preventive care, though
ambulatory and in-patient care is also covered. Such schemes tend to be financed through
patient collection, government grants and donations. Increasingly in India, CBHI schemes
are negotiating with the for profit insurers for the purchase of custom designed group
insurance
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3
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policies. However, the coverage of such schemes is low, covering about 30-50 million
indicates that many community-based insurance schemes suffer from poor design and
management, fail to include the poorest-of-the poor, have low membership and require
extensive financial support. Other issues relate to sustainability and replication of such
schemes. A comparison of various health insurance schemes by NGOs is given below in
table 9.

Table 9. Non-profit social insurance schemes in India

Name Location Members Type of
Insurance
1. ACCORD/ Tamil Nadu (Gudalur) 7 356 Health Insurance
ASHWINI Health (1997) (with NIA)
Insurance Scheme
2. Aga Khan Health Gujarat (Sidhpur) 40 000 Health insurance
Services3 (1997)
3. Apollo Hospital Tamil Nadu (Madras) 10 000 Health Insurance
Association (AHA) (1995) (with GIC)
4. ASSEFA Tamil Nadu (Madurai) N.N. Cattle Insurance
(Association of Health Insurance
Sarva
Sewa Farms)
5. Cooperative Andhra Pradesh 26 000 Death Relief Fund
Development (Hyderabad) (Life Insurance)
Federation (CDF)
6. Goalpara West Bengal 1 247 Health Insurance
Cooperative Health (Shantiniketan) (1997)
Society
7. Kottar Social Tamil Nadu 34 000 Health Insurance
Service Society (Kanyakumari)
(KSSS)
8. Mallur Health Karnataka 7 000 Health Insurance
Cooperative
9. Mathadi Hospital Maharashtra 150 000 Health Insurance

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Trust (Bombay/Mumbai)
10. Medinova Health West Bengal (Calcutta) 35 000 Health Insurance
Card Scheme
11. Navsarajan Trust Gujarat 10 000 Health Insurance
(with NIA)
Accidental
Insurance (with
LIC)
Nutrition
Legal Aid
Drugs
Fight Against
Corruption
12. New Life Tamil Nadu N.N. Health Insurance
13. Organization Tamil Nadu (Mysore) 1 137 Health Insurance
for Development of Accidental
People (ODP) Insurance (with
NIC)
14. Pragati Thrift and – 410 Death Relief Fund
Credit Society
15. Raigarh Madhya Pradesh 75 000 Health Insurance
Ambikapur Health (Raigarh District)
Association (RAHA)
Medical Insurance
Scheme
16. Saheed West Bengal 6 800 Health Insurance
Shibsankar Saba (Burdwan)
Samity (SSSS)
17. Seba Cooperative West Bengal (Calcutta) 3 000 Health Insurance
Health Society families (with GIC)
18. Self Employed Gujarat (Ahmedabad) 40,000 Integrated
Women’s Association Insurance Scheme

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(SEWA) Health Insurance
Life Insurance
(with LIC)
Accident (with
NIA)
Asset Insurance
Maternity Benefit
19. Kasturba Hospital Maharashtra (Wardha 19 457 Health Insurance
Scheme, Sewagram District) (1997)
20. Social Work and Rajasthan (Ajmer) 20 000 Health Insurance
Research Centre
(SWRC) (defunct?)
21. Society for Maharashtra 1 200 Health Insurance
Promotion of (Bombay/Mumbai) couples Accident
Area Resources Housing(with
Centre OIC)
(SPARC)
22. Students Health West Bengal (Calcutta) 550 000 Health Insurance
Home
23. Tribhuvandas Gujarat (Anand) 800 000 Health Insurance
Foundation
24. Trivandrum Kerala Craft & Gear
District Fishermen’s (Thiruvananthapuram) Fund (loan basis)
Federation (TDFF) Contingency Fund
(death, accidents,
loss of work)
25. Urmal Rural Rajasthan (Bikaner & N.N. Health Insurance
Health and Research Jodhpur)
Development Trust
(defunct?)
26. Voluntary Health Tamil Nadu 160 000 Health Insurance
Services Medical
Aid Plan

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 Source: Patrick Krause (2000), ‘Non-profit Insurance Schemes for the Unorganized
Sector in India’, Social Policy Division 42, Working Papers No. 22 e, GTZ

Some examples of community-based health insurance schemes are discussed herein.

Self-Employed Women’s Association (SEWA), Gujarat: This scheme established in

1992, provides health, life and assets insurance to women working in the informal
sector and their families. The enrolment in the year 2002 was 93 000. This scheme
operates in collaboration with the National Insurance Company (NIC). Under
SEWA’s most popular policy, a premium of Rs 85 per individual is paid by the
woman for life, health and assets insurance. At an additional payment o f Rs 55, her
husband too can be covered. Rs 20 per member is then paid to the National Insurance
Company (NIC) which provides coverage to a maximum of Rs 2 000 per person per
year for hospitalization. After being hospitalized at a hospital of one’s choice (public
or private), the insurance claim is submitted to SEWA. The responsibility for
enrolment of members, for processing and approving of claims rests with SEWA.
NIC in turn receives premiums from SEWA annually and pays them a lumpsum on a
monthly basis for all claims reimbursed. (Ranson K & Acharya A, 2003).

Another CBHI scheme located in Gujarat is that run by the Tribhuvandas

Foundation (TF), Anand. This was established in 2001, with the membership
being restricted to members of the AMUL Dairy Cooperatives. Since then, over 1
00 000 households have been enrolled under this scheme, with the TF functioning
as a third party insurer.

The Mallur Milk Cooperative in Karnataka established a CBHI scheme in 1973. It

covers 7 000 people in three villages and outpatient and inpatient health care are
directly provided.

A similar scheme was established in 1972 at Sewagram, Wardha in Maharashtra.

This scheme covers about 14 390 people in 12 villages and members are provided
with outpatient and inpatient care directly by Sewagram.

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 The Action for Community Organization, Rehabilitation and Development
(ACCORD), Nilgiris, Tamil Nadu was established in 1991. Around 13 000
Adivasis (tribals) are covered under a group policy purchased from New India
Assurance.

Another scheme located in Tamil Nadu is Kadamalai Kalanjia Vattara Sangam

(KKVS), Madurai. This was established in 2000 and covers members of women’s
self-help groups and their families. Its enrolment in 2002 was around 5 710, with
the KKVS functioning as a third party insurer.

The Voluntary Health Services (VHS), Chennai, Tamil Nadu was established in
1963. It offers sliding premium with free care to the poorest. The benefits include
discounted rates on both outpatient and inpatient care, with the VHS functioning as
both insurer and health care provider. In 1995, its membership was 124 715.
However, this scheme suffers from low levels of cost recovery due to problems of
adverse selection.

Raigarh Ambikapur Health Association (RAHA), Chhatisgarh was

established in 1972, and functions as a third party administrator. Its
membership in the year 1993 was 72 000.

Health Insurance Initiatives by State Governments

In the recent past, various state governments have begun health insurance initiatives. For
instance, the Andhra Pradesh government is implementing the Aarogya Raksha Scheme since
2000, with a view to increase the utilization of permanent methods of family planning by
covering the health risks of the acceptors. All people living below the poverty line and those
who accept permanent methods of family planning are eligible to be covered under this
scheme. The Government of Andhra Pradesh pays a premium of Rs 75 per acceptor. The
benefits to be availed of, include hospitalization costs up to Rs. 4000 per year for the acceptor
and for his / her two children for a total period of five years from date of the family planning
operation. The coverage is for common illnesses and accident insurance benefits are also
offered. The hospital bill is directly reimbursed by the Insurance Co mpany, namely the New
India Assurance Company.

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The Government of Goa along with the New India Assurance Company in 1988 developed a
medical reimbursement mechanism. This scheme can be availed by all permanent residents
of Goa with an income below Rs 50 000 per annum for hospitalization care, which is not
available within the government system. The non-availability of services requires
certification from the hospital Dean or Director Health Services. The overall limit is Rs 30
000 for the insured person for a period of one year.

A pilot project on health insurance was launched by the Government of Karnataka and the
UNDP in two blocks since October 2002. The aim of the project was to develop and test a
model of community health financing suited for rural community, thereby increasing the
access to medical care of the poor. The beneficiaries include the entire population of these
blocks. The premium is Rs 30 per person per year, with the Government of Karnataka
subsidizing the premium of those below poverty line and those belonging to Scheduled
Castes/ Scheduled Tribes. This premium entitles them to hospitalization coverage in the
government hospitals up to a maximum of Rs 2 500 per year, including hospitalization for
common illnesses, ambulance charges, loss of wages at Rs. 50 per day as well as drug
expenses at Rs 50 per day. Reimbursements are made to an insurance fund which has been
set up by the NGO / PRI with the support of UNDP.

The Government of Kerala is planning to launch a pilot project of health insurance for the
30% families living below the poverty line. The scheme would be associated with a
government insurance company. Currently, negotiations are under way with the IRA to seek
service tax exemption. The proposed premium is Rs 250 plus 5% tax. The maximum
benefit per family would be Rs 20 000. The amount for the premium would be recovered
from the drug budget (Rs 100), the PRI (Rs 100) and from the beneficiary (Rs 62.50) while
the benefits available would include cover for hospitalization, deliveries involving surgical
procedures (either to the mother or the newborn). Instead of payment by the beneficiary,
Smart Card facility would be offered. This scheme would be applicable in 216 government
hospitals.

Health Insurance Policy

A health insurance policy is a contract between an insurer and an individual or a

group, in which the insurer agrees to provide specified health insurance at an agreed-upon

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price the premium. Depending on the policy, the premium may be payable either in a lump
sum or in installments. Health insurance usually provides either direct payment or
reimbursements for expenses associated with illnesses and injuries.

 Cost

The cost and range of protection provided by the health insurance will depend on the
insurance provider and the particular policy purchased. These days, most companies give the
benefit of health insurance to the employees. However, in case your employer does not offer
a health insurance plan, it is advisable to opt for a health insurance scheme.

 Who can avail the Policy?

Health insurance can be availed by people aged between five and seventy five (The
upper and lower age limits may vary slightly depending on the policy). The health insurance
scheme could either be a personal scheme or a group scheme sponsored by your employer.

 What it covers?
In anticipation of unexpected events that create the need for medical goods and
services, the health insurance does not cover certain ailments. It does not cover ailments in
the first year after the policy is taken. It covers hospitalization charges for:

o Heart attacks
o Strokes
o Prolonged illnesses
o Loss of limb, eye, or other parts of the body due to accident
o Injuries
o Maternity expenses
o Medicines

 Points to be known

You should understand the policy, and become familiar with common health insurance
provisions, including limitations, exclusions, and riders. It is very important to know what
your policy covers and what you have to pay yourself. Health Insurance policies generally
cover boarding, nursing and diagnostic expenses, which include room rent charged at the

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hospital or nursing home, fees of the surgeon, anesthetist, doctor, etc. Some policies even
offer fixed cash amount for each day you stay at any hospital for treatment. If you have a
persistent health problem and then decide to take insurance, it might not be covered.
Expenses on hospitalization, incurred in the first 30 days after taking a policy are also not
entitled, except in case of an injury from accident. Treatment of certain diseases is not
covered during the first year of your policy. The list of diseases may vary form one health
policy to another.

Claims Settlement Procedures

Claim settlement is one of the most important tasks of any insurance company. Proper
settlement of claims requires a sound knowledge of the law, principles and practices
governing insurance contracts and in particular, a thorough knowledge of the terms and
conditions of the standard policies and various extensions and modifica tions there under.

The procedure in respect of claims under various classes of insurance follows a common
pattern and may be considered under three broad headings:

1. Preliminary
2. Investigation
3. Settlement.

The following is the general procedure followed in settlement of any kind of insurance
claims:

I. Notice of Loss

It is most essential that early notification of the loss be received by the insurer as per the time
limits provided for in the policy document. Delay would adversely affect the insurer’s
position. Therefore, non- fulfillment of this provision in insurance agreement will relieve the
liability of insurer if the non-compliance materially affects the insurer’s position. However,
whether there is delay in notification or not, this is ultimately decided by the Court of Law is
case of any dispute depending on the individual case and facts.

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 In case of health insurance it is essential that the policy holder if falls sick should
notify the insurer and the Agent/Broker immediately (within 24 hours time) after the
admission into the Hospital giving as many details as possible of the disease/symptoms, the
treating Doctor, the address of the Hospital for elective admissions.

In case of emergencies, the intimation or notice of ill health and other particulars may be sent
within reasonable time not exceeding one week.

The above intimations/ notices are mandatory requirements for claiming reimbursement
under the GIC norms. These procedures may vary from insurer to insurer depending on the
nature of the contract.

Procedure

The insurer will check the following on receipt of intimation of loss or damage from the
insured.

i. Enforcement of the policy on the date of occurrence of the loss or damage;

ii. Receipt of the notice of loss within the stipulated time period as mentioned in
the policy document.
iii. Loss or damage by a peril, which is covered under the insurance policy.

Once the above verification is made, the loss is allotted a number and entered in the Claims
Register. A separate file is opened for the claim with a copy of the policy, or relevant
extracts thereof filed with the claim papers. Thereafter, a claim form is issued to the insured.

II. Claim Forms

Each class of insurance will have different contents in its claim form. In general, the claim
form is designed to elicit full information regarding the circumstances of the loss, such as
date of loss, time, cause of loss, extent of loss. This information is necessary to enforce
contribution and subrogation.

In health insurance, the insured should submit the duly filled in prescribed claim form
to the insurer along with all the pertinent documents in original viz., original discharge
summary/ death summary, original bills of hospitalization payments etc., all the investigation

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reports in original including films of X- ray, ECG, CT Scan, MRI etc. These are again the
mandatory requirements for claiming reimbursement which should be done within seven (7)
days from the date of discharge from the Hospital.

III. Assessment of Loss

On receipt of the duly filled in claim form from the insured, the insurer decide about
investigation and assessment of the loss. If the loss is small, the investigation to determine
the cause and extend of loss is done by an Officer of the insurer. Investigation of large,
complicated claims is entrusted to independent professional surveyors. Sometimes it may be
waived and the loss settled on the basis of the claim form and evidences provided. In case of
an appointment of a surveyor, the surveyor is provided with all the relevant information
pertaining to the claim. The intimation of appointment of Surveyor will be sent to the
insured.

IV. Surveyors and Loss Assessors

Under Insurance Act, every insurer, in respect of a loss which has occurred in India and
requiring to be paid or settled in India equal to or exceeding Rs.20, 000 on any policy of
insurance shall be admitted and settled only after a report on the loss from a person who
holds a license to act as a surveyor.

In case of Personal Accident claims, the insured is required to submit a report from the
attending doctor specifying the cause of accident or the nature of illness as the case may be
and the duration of disablement. Depending on the conditions laid out in the policy, the
insurer reserves the right to arrange for an independent medical examination.

Third Party claims involving personal injuries are assessed on the basis of medical opinion of
a medical practitioner.

V. Claims Documents

For the purpose of providing further evidence and to substantiate the claim, the insured needs
to submit documents other than claim form and surveyor report. These documents include
police report and post mortem report in case of a personal accident policy claim etc.

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 Final Settlement

Once the above formalities are fulfilled, the claim is processed on the following basis:

Claim form
Independent surveyors report, medical opinion etc
Various supportive documents furnished by the insured and
Any other evidence secured by the insurer.

If the claim is in order, settlement is made by payment in the form of a crossed cheque in
favor of the insured. The payment is entered in the claims register and in the relevant
policy record. If there is any company- insurance, appropriate recoveries are made from the
company-insurer.

VI. Discharge Voucher

Depending on the policy, a discharge voucher is executed by the insured certifying the
amount received from the insured and other particulars of his full and final claim settlement
which discharges the insurer form any further obligations on the policy.

Procedure Followed in Settlement of Claims

Mediclaim

Mediclaim insurance is a cover which takes care of medical expenses following

hospitalization / domiciliary hospitalization of the insured in the following situations:

Sudden illness
Accident or surgery required in respect of any disease which has arisen during the
policy period.

Claim:

The claim is payable when treatment is given to the insured from a registered hospital or
nursing home. However, in the case of non-registered hospital or nursing home the treatment
can be covered under the policy subject to hospital/nursing home on conformation of the
following:
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 The hospital/nursing home should have 15 inpatient beds
It should have qualified nursing staff round the clock
Qualified doctors round the
clock Fully equipped operation
theatre

The very purpose of Mediclaim policy is to provide reimbursement in respect of treatment

taken in the hospital / nursing home, the policy also provides reimbursement in respect of
domiciliary hospitalization (treatment taken at home).

However, for a claim submitted for domiciliary hospitalization the following conditions
should be satisfied:

Medical treatment should be for more than 3 days.

The treatment should be such for an illness/disease/injury which in the normal

course would require treatment and care in the hospital/nursing home but actually
taken whilst confined at home due to any of the following circumstances:

1. Condition of the patient is such that he/she cannot be moved to

the hospital/nursing home or

2. The patient cannot be moved to hospital/nursing home for lack

of accommodation there in.
In the instance of death of the patient, the insurance company will insist upon
a succession certificate from a court of law for disbursing the claim amount in
the name of the nominee. In case of any dispute, the insurer can deposit the
claim amount in the court for disbursement to next legal heirs of the policy
holder.

Claim Forms

Claim form is a fundamental document which is the basis for the settlement of a claim on any
insurance policy. The objective of a claim form is to provide the relevant information
required by the insurer to facilitate the process of decision- making in a policy claim
settlement.

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Each class of insurance will have different contents in its claim form. In general, the claim
form is designed to elicit full information regarding the circumstances of the loss, such as
date of loss, time, cause of loss, extent of loss.

The other questions vary from one class of insurance to another. If the insurance is subject
to ‘pro-rata average’, a question is asked on the values of the property at the time of loss.

In those classes of policies, which are contracts of indemnity, a question is asked to ascertain
the other policies held by the insured covering the same subject matter and whether a ny third
party was responsible for the loss. This information is necessary to enforce contribution and
subrogation.

Simple filling and submitting a claim form does not constitute an admission of liability by
the insurer. All the correspondence sent by insurer in this regard are also sent ‘without
prejudice’ to their rights. To this effect in every claim form insurer will make it a point to
print the above in bold words.

Group Mediclaim Policy Form

CLAIM FORM FOR GROUP MEDICLAIM POLICY

(The issue of this form is not to be taken as an Admission of

Liability) Please give the following information correctly and
completely.

Claim No.

1. Name of the Insured

(i) Name of the Insured
(ii) Employee Salary Roll No.
(iii) E- mail id E- mail id
(iv) Policy No.

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2. Details of the Insured Person in
respect of whom claim is made:
(i) If family member, name &
relationship to the insured employee:

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 (ii) Present completed age
(iii) Occupation:
(iv) Residential address

3. Nature of disease / illness

contracted or injury suffered:
4. Date of injury sustained or disease / illness
first detected
5.(i) Name and address of the hospital /
Nursing Home / Clinic
(ii) Date of admission
(iii) Date of discharge:

6.(i) Amount of Pre and Post Hospitalisation

Expenses incurred

(ii) Total Amount Claimed

7. If the claim is for domiciliary
hospitalization, please indicate:

(i) Date of commencement of treatment

(ii) Date of completion of treatment
(iii) Name & address of attending Medical
(iv) practitioner
(v) Qualification
Telephone No.

In support of the above claim, I enclose following documents {Please indicate by ( Ö )}

1. Bills, Receipt and Discharge Certificate / card from the Hospital/Nursing Home.

2. Cash memos from the Hospital / Chemist(s), supported by the proper prescription.

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 3. Receipt and Pathological test reports from a Pathologist supported by the note
from the attending Medical Practitioner / Surgeon demanding such Pathological
tests.

4. Surgeons certificate stating nature of operation performed and surgeon’s bill and
receipt.

5. Attending Doctor’s / Consultant’s / Specialist’s / Anesthetist’s bill and receipt and

certificate regarding diagnosis, whichever is prescribed & thereby expenses
incurred.

Declaration

I here by agree, affirm and declare that:

a. The statements/information given/stated by me/us in this claim form are true,

correct and complete.

b. No material information which is relevant to the processing of the claim or which in

any manner has a bearing on the claim has been withheld or not disclosed.

c. If I have given/made any false or fraudulent statement/information, or suppressed or

concealed or in any manner failed to disclose material information, the policy shall be
void and that I shall not be entitled to all/any rights to recover thereunder in respect
of any or all claims, past, present or future.

d. The receipt of this claim form/other supporting/related documents does not

constitute or be deemed to constitute an agreement by the Company of the claim and
the Company reserves the right to process or reject or require further/additional
information in respect of the claim.

In case of Maternity Benefits Extension

I hereby declare that at the time of delivery covered by this claim, I did not have more than
two living children. I hereby warrant the truth of foregoing particulars in every respect and I
agree that if I have made or shall make any false or untrue statements, suppression or
concealment, my right to claim reimbursement of the said expenses shall be absolutely
forfeited notwithstanding any other action that the Company may take against me under the
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rules. I further declare that in respect of the above treatment, no benefits are admissible under
any other Medical Scheme or insurance.

In case of Reimbursement of Cost of Health Check-Up Extension

I confirm that no claim has been made by my family members or me for the past 4 policy
periods nor any claim is proposed to be lodged for the said period.

Place:

Date:

Signature of Insured
Employee

Important:

Since it is a pre-requisite for admission of claims under the policy that the Hospital / Nursing
Home / Clinic where the Insured Person was admitted, is registered with Local Authorities,
it is necessary for the claimant to ensure that the Hospital / Nursing Home / Clinic indicates
the same on the Bill-cum-Receipt issued by them.

(To be filled in by the Employer/Insured)

Was the injured person in respect of whom claims being made Yes/No
absent from work?

If so, please furnish the details of such absence

I / We hereby declare that the particulars made by the injured person in the claim from are
true to the best of our knowledge and belief.

Place :

Date :

Signature of the Insured

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 Third party administrators (TPA’S)
The health infrastructure in India is facing challenge of meeting the health goals and
complexities emerging from the changing disease pattern. The proliferation of various
healthcare technologies and increase in cost of care has necessitated the exploration of health
financing options to manage problems arising out of increasing healthcare costs. Health
insurance is emerging fast as an important mechanism to finance the healthcare needs of
people. Further, the uncertainty of disease or illness is accentuating the need for insurance
system that works on the basic principle of pooling of risks of unexpected costs of persons
falling ill and needing hospitalization by charging premium from a wider population base of
the same community. However, the complexity of health insurance industry has been much
talked about but less understood, especially in Indian scenario. With the advent of Third Party
Administrators (TPAs) this sector has assumed a new dimension. TPAs are presumed to
infuse new management system and enrich knowledge base of managing healthcare services
and costs. Their presence is aimed at ensuring higher efficiency, standardization and
improving penetration of health insurance in the country. TPAs potentially have a wider role
to play in standardization of charges and managing cash- less services in health insurance.
There are questions that in what ways the TPA is going to influence the developments in the
health sector. The influence of TPAs to a large extent would be determined by their activities,
the way they organize their services and their revenue generation model. In present form,
TPAs earn their major revenue from fees charged as commission on insurance premium.
Insurance Regulatory and Development Authority (IRDA), the regulatory body for insurance
sector in India has standardized this rate. Besides this, TPAs have a potential source of
revenue from benefit management, medical management, provider network management,
claim administration and information and data management. However, the insurance sector
still faces challenge of institutionalizing the TPA services and there is substantial scope for
improvements.
Third Party Administrator (TPA) was introduced through the notification on TPA-
Health Services Regulations, 2001 by the IRDA. Their basic role is to function as an
intermediary between the insurer and the insured and facilitate the cash- less service of
insurance. For this service they are paid a fixed per cent of insurance premium as
commission. This commission is currently fixed at 5.6 per cent of premium amount.
The core product or service of a TPA is ensuring cashless hospitalization to policyholders.
Intermediation by TPAs ensures that policyholders get hassle-free services, insurance
companies pay for efficient and cost-efficient services, and healthcare providers get their

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reimbursement on time. By doing this it is expected that TPAs would develop appropriate
systems and management structures aiming at controlling costs, developing protocols to
minimize unnecessary treatments/investigations, improve quality of services and ultimately
lead to lower insurance premiums.
OPERATIONS OF THE TPA:
The entire operation of the TPA can be classified in seven different stages which starts right
from receiving the data of policyholder from the insurance company to claims settlement.
The stages of the operational activities are:
• Receipt of data
• Preparation of ID cards.
• Updating master member file
• Hospitalization producer – Non - network hospital.
• Hospitalization procedure – Network hospital.
• Claims processing procedure
• Post hospitalization claims process.
There are around 28 TPA’s in India, some of these
are: Safeway Mediclaim Services (License

No.026) Alankit Health Care Limited (License

No. 021) E Meditek Solutions Ltd (License No.

007), etc.

Future of Health Insurance

Given the situation, there are few issues of concern or barriers towards implementing a social
health insurance scheme in India. These are enumerated below along with the possible way
ahead.

India is a low-income country with 26% population living below the poverty line, and 35%
illiterate population with skewed health risks. Insurance is limited to only a small proportion
of people in the organized sector covering less than 10% of the total population. Currently,
there no mechanism or infrastructure for collecting mandatory premium among the large
informal sector. Even in terms of the existing schemes, there is insufficient and inadequate
information about the various schemes. Data gaps also prevail. Much of the focus of the
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existing schemes is on hospital expenses.

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There continues to be lack of awareness among people about health insurance. In spite of
existing regulation in some States, the private sector continues to operate in an almost
unhindered manner. The growth of health insurance increases the need for licensing and
regulating private health providers and developing specific criteria to decide upon appropriate
services and fees. Health insurance per se, suffers from problems like adverse selection,
moral hazard, cream-skimming and high administrative costs. This is coupled with the fact
that in the absence of any costing mechanisms, there is difficulty in calculating the premium.
There is also a need to evolve criteria to be used for deciding upon target groups, who would
avail of the SHI scheme/s and also to address issues relating to whether indirect costs would
be included in health insurance. Health insurance can improve access to good quality health
care only if it is able to provide for health care institutions with adequate facilities and skilled
personnel at affordable cost.

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 Conclusion
In India has limited experience of health insurance. Given that government has
liberalized the insurance industry, health insurance is going to develop rapidly in future. The
challenge is to see that it benefits the poor and the weak in terms of better coverage and
health services at lower costs without the negative aspects of cost increase and over use of
procedures and technology in provision of health care. The experience from other places
suggest that if health insurance is left to the private market it will only cover those which
have substantial ability to pay leaving out the poor and making them more vulnerable. Hence
India should proactively make efforts to develop Social Health Insurance patterned after the
German model where there is universal coverage, equal access to all and cost controlling
measures such as prospective per capita payment to providers. Given that India does not ha
ve large organized sector employment the only option for such social health insurance is to
develop it through co-operatives, associations and unions. The existing health insurance
programs such as ESIS and Mediclaim also need substantial reforms to make them more
efficient and socially useful. Government should catalyze and guide development of such
social health insurance in India. Researchers and donors should support such development.
Taking a look at the various steps and strategies that need to be followed by
companies that hope to conquer the Indian health insurance market, we see that the four
main challenges facing the industry are product innovation, distribution, customer service,
and investments. Flexible products and new technology will play a crucial role in reducing
the cost and, therefore, the price of insurance products. Finding the niche markets, having the
right product mix through add-on benefits and riders, effective branding of products and
services and product differentiation from competitors' offering will be a few challenges faced
by new companies. Inarguably the potential market for insurance buyers is tremendous in
India and offers great scope for growth. While estimating the potential of the Indian
insurance market we are often tempted to look at it from the perspective of macro-economic
variables like the ratio of premium to GDP (which is indeed comparatively low in India) but
the fact is that the number of potential buyers of insurance in India is certainly attractive.

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