Overcoming High Claims in Health Insurance

During the financial year 2021-22, around 3000 CR rupee of health claims paid from the pocket of the insurance companies for health insurance.

In the 2021-22 fiscal year, the performance of the Health Insurance industry was generally disappointing, as the net premium to claim ratio was negative. However, some companies managed to perform well, including GoDigit, Kotak, Aditya Birla, Care Insurance, and Niva Bupa. Among them, GoDigit stood out with an impressive 51% profitability in net premium to claims. On the other hand, 32% of companies recorded negative numbers, and all public sector insurance companies faced similar challenges.

Around 15% of companies managed to achieve positive numbers, though their profitability ranged only between 0-10%. Another 17% of companies fared better, with a profitability ratio between 10-20%. Overall, 26% of the companies demonstrated satisfactory performance. Upon further examination, it was discovered that among the 26% of companies that performed well, 6% of them had actually conducted very low business. This skewed perception led us to initially consider them as good performers erroneously. Taking this into account, the actual number of companies that performed commendably amounted to 20% overall.

In contrast to the previous fiscal year (2020-21), the majority of companies demonstrated improvements, which positively impacted the industry's overall earnings of 5100 CR. Only a small fraction, around 11%, experienced negative profitability, and even those negative numbers were not significantly detrimental.

At insurnest, we specialize in addressing such challenges by going deeper into the problem statement and identifying key issues.

Our research revealed that new-age insurance companies outperformed traditional players, largely due to their focus on technology and Phygital experiences. These companies targeted tier-2 and tier-3 cities, leveraging a digital distribution network, and empowered sales agents with technology.

Given the competitive market, charging non-competitive premiums is not a viable solution for profitability. To address the issue of higher claim to net premium ratio, we identified several key problems:

1.Increasing healthcare costs

Healthcare inflation stands at 14%, implying that the current health costs will more than double within a decade. Insurance operates by pooling funds to pay for others' medical expenses, necessitating a delicate balance between claims and collected premiums.

2. Unhealthy lifestyles

In the present era, unhealthy lifestyles characterized by irregular sleeping patterns, consumption of junk food, and high-stress occupations contribute significantly to the prevalence of lifestyle diseases, including Diabetes, Hypertension, Stroke, and more.

3.Medical fraud

Certain individuals within the system attempt to exploit loopholes and utilize them for fraudulent activities.

4.Inadequate underwriting

Occasionally, underwriters make errors in their assessments by approving cases that result in claims. These errors may stem from underwriting logic flaws or human mistakes in the underwriting process.

5.Lack of active monitoring

Identifying fraud after it occurs poses challenges for insurance companies in recovering the funds. Similarly, inadequate monitoring and risk adjustments in underwriting can lead to an increase in claims and create further complications.

6.Aging population

India's population comprises approximately 13.9 Crore individuals aged 60 and above, accounting for 10% of the total population. Projections indicate that by 2026, the number of individuals over the age of 60 will rise to 17.2 Crore. With increased life expectancy in India, there is a corresponding rise in the number of insurance claims due to the aging population.

7. Varied treatment rates across different cities

The varying rates of treatment across cities create challenges in accurately predicting claims.

8. Product sales in incorrect regions/territories

Occasionally, a product is meticulously designed for particular age groups, regions, and purposes, but sales end up targeting the wrong audience.

9.Delayed action on underwriting insights

The underwriting team receives valuable insights from multiple departments, yet the implementation of these insights is delayed due to process or technological constraints.

10.Inadequate focus on preventive measures

During the implementation of corrective measures, preventive actions such as digital wellness programs and fraud detection are not put into effect.

In response to these challenges, we developed two streams of technological solutions:

1. Preventive Action: Implementing solutions to prevent diseases before they occur.

Digital wellness programs

Digital wellness programs such as, Fitness tracking, Nutrition tracking, Health Education, Virtual Coaching, Integration with Wearable Devices etc can be implemented without much cost to prevent the diseases.

Real-time fraud detection systems with underwriting and fraud alerts

The real-time fraud detection systems promptly alert the underwriting department and claim teams about potential anomalies in the system. These systems can be both preventive, by proactively identifying issues, and corrective, by facilitating prompt actions to address any detected fraud.

Digital Telehealth solutions

Insurance companies have the option to establish a centralized telehealth solution, offering telehealth services such as online doctor consultations. Telehealth can play a significant role in providing treatment for diseases, preventing illnesses, and offering mental support to individuals.

Chronic disease management and assistance for quitting smoking/tobacco

To address the requirements of managing chronic diseases like Diabetes, insurance companies can create digital solutions to assist patients in their healthcare journey. These solutions may include timely reminders for medication intake, scheduled checkups with doctors, alerts for fluctuating sugar levels, and insights into potential future health issues related to the chronic disease. Additionally, the digital platform can provide guidance and measures for mitigating the impact of the condition effectively.
Smoking and tobacco use contribute to numerous diseases. Insurance companies have the opportunity to launch digital initiatives to address this issue. By creating a mobile app, users can be motivated to quit smoking/tobacco consumption. Moreover, implementing gamified digital rewards can further incentivize and encourage individuals to overcome their smoking habits.

Digital stress management

The rise of stress in metro cities is a common concern. To foster a healthier lifestyle and tackle this issue, insurance companies have the option to introduce digital solutions such as mobile apps, virtual courses, and virtual mental support. These resources aim to empower individuals to lead a healthier and more balanced life.
Early detection of many diseases is possible through regular preventive checkups. Insurance companies can establish partnerships with labs and lab aggregators to conduct these preventive tests at regular intervals. Implementing such initiatives can significantly contribute to the early identification of diseases, enabling timely intervention and better healthcare outcomes.
Digital pandemic/contagious disease communication and awareness programs
- In the event of a COVID-like pandemic or any contagious diseases, digital communication can be employed to reach all policyholders and provide them with essential safety guidelines and precautions.

2. Corrective Action: Solving current problems and preventing their recurrence through technology.

Automated underwriting to eliminate human errors and bias

To minimize human errors and biases in the underwriting process, numerous insurance companies are transitioning to automated underwriting systems. This shift not only enhances transparency in the system but also expedites and improves the accuracy of the underwriting process.

Technology-driven underwriting alerts for monitoring anomalies

Technology can play a crucial role in monitoring underwriting cases and detecting anomalies. By leveraging technology, alerts can be promptly raised to the relevant team whenever there is an imbalance in risk management or a concerning case. This enables timely intervention and better management of underwriting processes.

Capturing medical device level data in addition to physical files

During the claim processing, we traditionally depend on physical files obtained from hospitals. However, with the advancement of medical devices, they now generate valuable digital data. This data can be harnessed to improve pattern understanding and enhance underwriting processes significantly.

Preventing medical fraud with digital patient inspections

Live inspections of patients in hospitals can be a powerful deterrent against medical fraud. By storing this data in digital form, it becomes easily accessible for scrutiny, enabling the detection of any anomalies that may arise. This proactive approach can significantly contribute to the prevention of medical fraud.

Collaborating with digital labs and telemedicine for centralized approvals and negotiated rates

Medical treatments and planned surgeries entail a specific set of required medical tests and medications. To optimize this process, insurance companies can form partnerships with telemedicine firms and digital labs. Leveraging technology, the entire process can be automated, ensuring efficient and seamless planning and execution of the necessary procedures.

Real-time fraud detection using graph analytics and AI

AI and Graph Based Analytics offer effective fraud detection capabilities. By connecting various entities such as patients, nominees, diseases, hospitals, doctors, etc., through a graph database with specific relationships, potential fraud patterns can be identified. The Risk Management team can analyze these patterns to uncover fraudulent activities. Additionally, the graph database's query language aids in detecting and analyzing intricate fraud patterns. Advanced AI algorithms further enhance the ability to identify new types of fraud, bolstering fraud prevention efforts.

Regular data analysis for informed decision-making

To gain valuable insights and develop a future roadmap for claims settlement, it is essential to conduct regular data analytics using Data Lakes, Data Warehouses, and Business Intelligence tools. These analytical processes provide a comprehensive understanding of underwriting and claims, facilitating informed decision-making and improved claims management strategies.

Risk prediction through AI

Advanced AI algorithms enable the prediction of risks with greater accuracy.

Streamlining claim manager workflow and process automation with software

Software can facilitate the automation of claim management workflows and processes.

By leveraging technology, insurnest aims to address the challenges posed by higher claim ratios and improve the profitability of health insurance offerings.