In a new sigma report, the first for 2015 Swiss Re concludes that “demand and expectations for better healthcare services are rising in the emerging markets,” and that as a result it expects “premiums for reimbursement-type products to double by 2020.
The report – “Keeping healthy in the emerging markets: insurance can help” – notes that “private health insurers have the tools to meet this demand, and can “play a key role in building sustainable national healthcare systems.”
The report explains that “as income levels in emerging markets rise, people spend more on healthcare services as a means to improve their quality of life. This is driving demand and expectations for better health services in the emerging markets.”
The study shows that “the insurance industry is well-equipped to meet the increasing healthcare spending needs of individuals, and that it can also become a central pillar of a sustainable national healthcare delivery system.
“In the emerging markets, the money to pay for healthcare has traditionally come from the government via taxation revenues and from private individuals who often make significant contributions from their household savings.
“However, reliance on these two channels of healthcare financing is becoming increasingly challenging. There are growing strains on public coffers and at the same time, more advanced technologies and medicines are pushing up the price of healthcare services.”
Private health insurance (PHI) “provides consumers financial protection against future care-related expenses at an affordable regular premium, relieving the burden of large one-off hits to private savings,” the report notes.
“Consumers will increasingly be purchasing PHI because it provides a means to pay for level of healthcare services they need,” said Kurt Karl, Swiss Re’s chief economist.
The report also points out that PHI “offers consumers more choice with respect to place, type and level of treatment, and, with certain products, freedom to choose how to use the benefits received (e.g. to cover treatment costs or perhaps as income replacement). In this way, it can supplement and/or complement public sector health services by helping consumers pay for treatments not covered by or available from state-sponsored schemes.”
It also benefits governments as “PHI has the potential to be a main channel of healthcare expenditure.” The report, however, indicates that “it is underused. In 2012, PHI covered less than 10 percent of total healthcare spending in the main emerging markets.
“On the supply side, PHI can bring innovation across the value chain in healthcare, including in product development, sales and distribution, underwriting, claims, payment systems and customer services, leading to better services at lower cost,” the report continues
Clarence Wong, co-author of the study notes that “insurers have been able to reach new clients with the use of new technologies and by pricing products in line with willingness and ability to pay.”
As an example, Swiss Re cites the establishment of a mobile health insurance scheme in Nigeria in 2014, called Y’ello Health. “Subscribers pay an affordable premium using their mobile phones for cover of basic outpatient care and minor surgery. The scheme is expected to significantly extend the reach of health insurance in Nigeria, particularly in rural areas and to the previously under- and uninsured.”
Swiss re also expects PHI products to see continued growth. It explains that there are “two main types of PHI product. The first is reimbursement-type, with which the insured is paid back the costs incurred in hospital and other treatment. The second are fixed-benefit products, whereby the insured receives a lump sum at the onset of specific conditions. Fixed-benefit products include critical illness, disability income and hospital cash insurance.
“Both product types are showing strong growth in the emerging markets. Premiums from reimbursement products grew by an estimated 11.2 percent in real annual terms between 2003 and 2013. They are forecast to rise on average by 9.6 percent per year to 2020, three times the rate of global premium growth in this segment.”
Source: Swiss Re
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