"You Won't See Your Medical Bills"

Do you consider infrastructure a necessary pre-condition for privati-sation in the health sector?

I see it as a chicken-and-egg situation. If you keep waiting for infrastructure, it will be an eternal wait. But if private players come in, funds will be generated for ploughing back into better medical care. Health insurance will create demand for better services. Hospital groups will see a steady income from insurance and be able to do long-term financial planning and investment for upgrading infrastructure. There will be all-round improvement in medical facilities, not just at the top-end but at all levels of affordability because insurance will create demand among a cross-section of people.

What are the specific problems of this market?

The problems in India are unique to this country and so it is difficult to extrapolate the Malaysian or Indonesian model because of the difference in populations. As for China, it has opened up the market state-by-state, starting with Beijing. At present, there are four companies operating in China depending on the government's political relationship with their parent country. The political system there enables the country to push reforms at the pace they want to. In a democratic system, decision-making is often slowed by the need for political consensus or consequences. But India is more open, transparent, has a regulatory authority and a well-developed industry in the Life Insurance Corporation and the General Insurance Corporation. Reforms here, albeit slow, will be on a much wider footing.

In 1995, the 'claims outgo' from GIC was 130 per cent. How do you plan to fight false claims and frauds?

The health insurance market in India now has 20 lakh customers who bring in an income of Rs 20 crore. Even if the market grows by 50 per cent every year, by AD 2000 it will have an income of Rs 675 crore. At present, less than 2 per cent of GIC's income comes from health insurance. In addition to the low levels of profitability, there is the set-up cost for new entrants without access to the rest of the market. New players have to look at a payback period of 15-20 years. The flip side is that they would also expand the market and bring in world-renowned underwriting skills, risk management and claims delivery systems. That would beef up the system. The problems of frauds and connivance is not unique to India and we have management procedures to tackle the problems.

Will minority shareholding be an issue with foreign companies expecting wider control on their business?

It's not an issue with us and we're not surprised. The maximum stake for foreign companies in industries like telecom is 49 per cent. We are minority shareholders in Indonesia and Malaysia.

How will the Indian consumer benefit by your entry into the market?

He'll get choice. In terms of pure products as well as pricing. You'll be able to choose what you need and what you can afford. You may just want cover for common everyday illnesses or only for critical illnesses. More importantly, we'll bring speed in the claims recovery process. Today if you were inflicted by a medical problem you'd first go to the hospital, get treated, pay the bill, even borrow money to pay the bill and then take up the process of claim with the insurer. In the western markets, you don't see the bill as a customer. If the insurer has a doubt or issue, he takes it up with the hospital. That's what claims are about. That's what we'll bring to customers here. There'll be a major change in the way policies will be sold—people understand what will be paid and not paid for and how claims are settled.

Are concerns on opening up health insurance unfounded?

Two key concerns are funds moving out of the country and employment. We wouldn't move funds out of the country because we'd need assets to meet our liabilities. Second, it would mean foreign exchange exposure which we wouldn't like. Third, we're in India on a long haul. As for employment, take the example of an erstwhile nationalised industry like banking where the number of people employed has actually gone up after private banks came in. In Uruguay which opened up four years ago, the market has doubled and employs more people while offering better products and service. In the Czech Republic, even after five years of opening up, the state-owned company holds 85 per cent of the market. Worldwide trends show that many apprehensions might be misplaced.

Do you advocate a free-for-all insurance regime?

There should be a balance between the chaos of free-for-all, yet enough restrictions to make a difference. The role of the insurance regulatory body should be only to regulate and not interfere with products and pricing—that should be left to businesses to decide. The companies—six to 10 would be an ideal number—should be managed by an insolvency margin which is roughly the amount of capital you have as a percentage of premium. The regulatory authority should look into the quality of senior management in the various companies and there should be open competition in terms of products and pricing. Further, the policies should be consistent all over the country to be of real benefit to customers.