BLOCK – 1 HEALTH INSURANCE, MARKET FAILURE AND RISKS
The health care need of the country is on the rise. On the other hand cost of health care is enormous. Financing health care of the community varies from country to country. In India financing is being done by various mode like government budgeting and allocations, out of pocket payment, social insurances, employer based schemes and voluntary health insurances. The invent of third party payment led to various malpractices like unnecessary admissions, investigations, double billing and even creating bills without even admitting the patients or wrong patients etc The inception of a regulatory authority for insurance business in India led the way for health insurance both private and public to grow which regulates the industry both from the insurer side as well as the provider and the customer (patients). The Health Insurance industry is gaining acceptance by the public, the insurer and being utilized by the service provider, but getting reformed to create a win-win situation to all stakeholders.
After completng this unit, you should be able to
- explain various health care financing modalities.
- define what is health insurance and what are the types of health insurance.
- elaborate about the insurance regulatory authority in India.
- highlight the risk and benefit of health insurance.
- describe the methods to overcome risks.
INSURANCE IN INDIA
The Insurance sector in India governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries. Evolution of Insurance before Nationalization Insurance in the Colonial Era. Life insurance in the modern form was first set up in India through a British company called the Oriental Life Insurance Company in 1818 followed by the Bombay Assurance Company in 1823 and the Madras Equitable Life Insurance Society in 1829. All of these companies operated in India but did not insure the lives of Indians. They were insuring the lives of Europeans living in India. Some of the companies that started later did provide insurance for Indians. But, they were treated as “substandard”. Substandard in insurance parlance refers to lives with physical disability. In this case, the common adjustment made was a “rating-up” of five to seven years to normal British life in India. Therefore, Indian lives had to pay an ad hoc extra premium of 20% or more. This was a common practice of the European companies at the time whether they were operating in Asia or Latin America. The first company to sell policies to Indians with “fair value” was the Bombay Mutual Life Assurance Society starting in 1871. The first general insurance company, Triton Insurance Company Ltd., was established in 1850. It was owned and operated by the British. The first indigenous general insurance company was the Indian Mercantile Insurance Company Limited set up in Bombay in 1907. Insurance business was conducted in India without any specific regulation for the insurance business. They were subject to Indian Companies Act (1866). After the start of the “Be Indian Buy Indian Movement” (called Swadeshi Movement) in 1905, indigenous enterprises sprang up in many industries. Not surprisingly, the Movement also touched the insurance industry leading to the formation of dozens of life insurance companies along with provident fund companies (provident fund companies are pension funds). In 1912, two sets of legislation were passed: the Indian Life Assurance Companies Act and the Provident Insurance Societies Act. There are several striking features of these legislations