Healthcare Insurance Driven by Technology – The Road Ahead

This article was first published in the February issue of Insurance Regulatory and Development Authority of India (IRDAI).


The need for Integration of Information Technology (IT) solutions is one of the major drivers for growth across industries today. Some sectors are catching on to this trend faster than others and are growing exponentially. The healthcare insurance sector in India has the potential for tremendous growth and the various policies introduced, since the inception of healthcare insurance, have tried to provide an appropriate healthcare cover to the citizens. However, the sector has reached a point where technology must form the backbone of all processes involved in insurance claim settlement. To cater to the growing consumer demands today and in the future, a standardized protocol supported by technology and implemented across hospitals, TPAs and insurance companies that facilitates cashless healthcare insurance for all is the answer.

Keywords: information technology, healthcare insurance, standardization, cashless, paperless

Healthcare Insurance Driven by Technology – The Road Ahead

Insurance companies are slowly reaching a stage where adoption of solid technology solutions is not just another value add but becoming a necessity. Market forces will drive adoption of technology because the end consumer; be it the patient or the hospital will demand better service levels, accuracy and transparency. Insurance companies too, need to make their business more predictive and analyzable to maximize profitability. To accomplish this, meaningful adoption of technology is a must and early adopters will benefit the most.

The insurance sector needs to continuously reinvent itself with the constantly evolving and increasing demands of the customer. However, progress has been slow and is not on par with other verticals such as finance and banking, which are already leveraging IT to increase customer base and provide customized services. With the growth volume that is expected in the coming future, if the health insurance sector has to scale and

bring in greater transparency, accuracy, and service levels there is no alternative but to use appropriate technology to enable these aspects.

Healthcare Insurance in India

India was first introduced to the concept of health insurance in 1912 when the first insurance act was passed. In 1948, the Central Government introduced the Employees’ State Insurance Scheme (ESIS) for blue-collar workers employed in the private sector. 6 years later, the Central Government Health Scheme was launched for government employees and their families. 1986 saw the introduction of Mediclaim started by government insurance companies. (Source:

To ensure a systematic growth and development of this sector in India, the Insurance Regulatory and Development Authority of India (IRDA) was established in 1999. It played a critical role in shaping the health insurance industry by introducing various norms and guidelines for the smooth functioning of this rapidly emerging sector. The year 2000 marked one of the major landmarks in the history of insurance (including health) in India when the sector was re-opened to FDI allowing up to 26% investment (source: As the number of players increased, the number of lives covered increased phenomenally during the next decade. Apart from the four key public sector organizations, today we have 24 companies in the private sector offering non-life insurance to Indians. The next milestone for Indian Health Insurance is large scale inclusivity enabled by robust and scalable technology.

The gross health insurance premium collected in the year 2013-14 was Rs 17,495 crore, increased by 13.21% from the year 2013-12. The four public sector non-life insurance companies continue to contribute a major share of health insurance premium at 62%, which has remained stable over the last four years. The remaining 38% contributed by the private sector is further broken down into; 26% premium contributed by non-life insurers and 12% by stand-alone health insurance companies, which, also has remained more or less the same since 2010 (Source: IRDA Annual Report – 2013-14). In the same year, 6% of the Gross Domestic Product (GDP) was spent on healthcare and about 86% of it is made up by out-of-pocket expenses, which has remained the same since 2000. Also, only about 17% (2,162 lakh) of the Indian population currently has some type of health

insurance cover. Various comprehensive health insurance schemes launched by the Central and State governments is a welcome step in expanding the horizon and extending some sort of health cover to the remaining 83% of the population. (Source: World Bank Report 2014)

While commendable measures are being undertaken to extend health coverage to the current Indian population, it is imperative to consider the huge influx of demand that this sector would face in the coming decades. In India, majority of the population comprises of young adults who would enter the elder age bracket in a couple of decades. The youth population (under the age of 35) at 825 million comprises of 66% of the Indian population as of November 2014. It is the largest in the world and will be the middle-aged to senior citizens of India in the coming decades, forming a large section of the population needing healthcare insurance and services. According to United Nations Population Division, by 2050, the median age will rise to 37 from 27 years, and the number of elderly (over 60 years of age) will rise from 100 million to 300 million. (Source: Financial Express)

To support a system of such massive proportions, the advanced healthcare services provided at the front-end need to be balanced with an equally advanced process of insurance claim processing at the back-end. Shifting the stages involved in processing claims from offline to online can speed up the entire process and make the system

more efficient, reliable and accountable. Such measures will benefit all involved economically and contribute tremendously to the growth of the sector. By adopting an electronic channel for exchange of data, healthcare industry in India can inch closer to replicating the global best practices. Access to these global best practices were also one of the major byproducts that the industry hoped for when it was opened up to foreign investment.

Challenges faced by the Indian Healthcare Industry

Healthcare insurance has witnessed a period of phenomenal growth and development in India. Various cashless health insurance schemes have witnessed remarkable adoption across sectors, including at the grass root level. To ensure efficiency of operations, it is crucial for all the participants in the health insurance sector to maintain complete accuracy and a quick turnaround time during the entire claim settlement process. However, there still seems to be an over reliance on manual processes for gathering information, maintaining records and decision making related to the rules of the insurance coverage, across all stages in this process. This dependency can affect the overall efficiency of the claim settlement process by increasing inaccuracies and making the process cumbersome for all parties.

To make the process accurate, hassle free and paperless for its intended beneficiaries, a strong technology support is required for transferring the entire process of capturing and transmitting data in the claim settlement process electronically. Software solutions and the relevant IT infrastructure support can help in ensuring that the entire claim settlement process is smooth. To find solutions for improving the overall efficiency of this process, it is essential to understand various concerns of the three key players in the healthcare insurance ecosystem; the insurance company and the hospital at one end, and the consumer the other end. If the concerns of these two players are appropriately addressed and solved, the concerns faced by the consumer will also begin to resolve. An efficient market ultimately leads to a profitable market.

  1. Insurance Industry concerns

Higher back-and-forth leading to lower efficiency: The efficiency of the insurance companies and TPAs is affected if there is a constant back-and-forth of exchanging PDF / Jpeg / paper-based forms. Hospitals adopt various Hospital Information Systems (HIS) to enable the internal processes and administration and similarly Insurance Companies / TPA’s have a similar platform for enabling the entire claims adjudication process. However, these two kinds of systems do not talk to each other and the entire process of exchanging information is manual and ‘non-electronic’ to the extent that all information is converted to PDF / paper or interpreted by a human resource and then entered into the corresponding systems. Human interpretation of policy rules at various stages leave room for different analysis of the same information. This leads to far lesser transparency as at each stage, the process is subject to different human interpretations. This limits the whole ability to leverage technology optimally, not to mention the enormous amount of paper being used and wasted. For example, a study found that the United States of America wastes about $375 billion in billing and healthcare insurance related paperwork every year (source: If a similar study were conducted in India, the results would be alarming as well.

Standardization: In 2013, IRDA released a report calling for standardization of definitions of commonly used terms in policies, pre-authorization and claim forms, billing standards, list of excluded expenses in hospitalization, etc. for all life insurers, non-life insurers, stand-alone health insurers and TPAs. Despite such attempts, there are still disparities in the claim settlement documentation process. Absence of a strong, transparent electronic communication channel to organize and standardize cashless health insurance delivery, financing and documentation leads to different interpretations at different ends resulting in communication of incorrect information and possibility of incorrect sum being approved.

The Solution

An electronically readable format can eliminate the multiple steps at which data is converted by both the hospital and the TPA/insurance company. If exchange of information is made possible through readable formats supported by technology, the process will become coherent and significantly reduce human error.

Defining uniform standards across providers will ensure uniformity of operations. This in turn, will enhance efficiency of the healthcare system in the country. It will lead to lower transaction times for getting credit authorizations, making and submitting insurance claims, processing claims, and making and tracking settlements. An overall decrease in cost of healthcare administration due to standardization of processes could be passed on to the needy patients thus, providing wider access to healthcare in a cost-effective manner. Standardization will enable sharing of information between disparate systems leading to lesser effort in data gathering and processing information which in turn will lead to a smoother collaboration between all. With the entire process being automated, it becomes simpler for the participants to identify the stage at which the claim settlement process is held at a given point of time. Necessary measures can then be taken to expedite the process depending on the requirements of the case.

  1. Hospital concerns

Profitability: Manual processes of data collection often lead to delays in the settlement of health insurance claims. This also means a delay in the discharge of patients even after an approval from the doctor. In instances where the doctor approves the discharge but the claims process doesn’t come through, the patient has to wait till the claims process is completed. The additional hours that the patient spends waiting in his/her hospital room/bed lead to under utilization of resources, which could be used by another needy patient and also an unhappy customer who is waiting unnecessarily. Hence, there are two consumers who end up being unhappy – the one who is waiting to leave the hospital and is not able to and the one who is waiting to get admitted but cannot until the bed is vacated. A faster, more efficient, and automated process could make the hospital facilities available for serving another patient thereby, improving hospital profitability and efficiency in utilization of critical resources. There is also a need to reduce disallowances while settling cashless claims specifically, in the case of cashless insurance. The approval that a TPA / Insurance company provides to a hospital at the time of discharge is not necessarily the same amount being paid at the time of final settlement. The amount that the TPA / insurance company does not agree to pay has to be born by the hospital, resulting in a loss.

The Solutions

With a reduced turn-around-time, hospitals can ensure that the patient is discharged as soon as the treatment and the recuperation time are over. They do not have to wait for confirmation from the insurance companies about the claim settlement, which usually takes about 4-5 hours. With faster discharge, there is optimum utilization of beds available at the hospitals thereby, enhancing their profitability. In case of cashless insurance, to reduce disallowances as well, electronically readable exchange of information at the time of discharge can enable TPA and Insurance companies to provide far more accurate approvals at the time of discharge resulting in lesser disallowances and thus, monetary benefit to the hospital.

Technological solutions, like end-to- end Payer-Provider Network can be introduced at the back-end of insurance processes to ensure standardization and quick turnaround time. It will help in maintaining error-free records, making insurance claim procedures paperless and ensure smoother collaboration between all parties involved. This in turn would be tremendously beneficial for all the participants in the health insurance sector by sending home happy and stress-free customers.

  1. Addressing Consumer Concerns

Faster claim adjudication process results in minimizing the waiting time for patients. It can be achieved through real time monitoring of claims making it possible for hospitals, TPAs and insurance company to expedite the entire process by identifying the stage at which the process was held and thus, avoid delays. Also, at the end

of the treatment when the doctor approves the patient’s discharge, he/she need not wait till the paperwork on insurance claim settlement is completed. For example, if a patient has a cashless health insurance policy and is admitted in a hospital that uses technology for cashless insurance claim exchange and processing, on the day of discharge, the patient can leave in or within an hour as all exchange of information between the parties involved will be facilitated through the technology integration and hence, will be far more efficient and speedy.

A standardized and streamlined system backed by technology will also, result in a stress-free experience where the patient and their relatives, as well as the doctor will then, focus on the illness and the treatment alone rather than going back-and-forth between the hospital and insurance companies / TPAs. An efficient system ensures customer satisfaction and thus, customer loyalty, beneficial to all the stakeholders of the insurance ecosystem.


Health insurance is gradually emerging as a substantial contributor in the healthcare ecosystem of India. But the government expenditure on healthcare per person is only about 1.2% of GDP, compared with an average of 7% for Organization for Economic Co-operation and Development (OECD) countries (source: Financial Express). Given the large section of uninsured population, there is a tremendous scope for stepping up efforts to make the health insurance sector profitable and beneficial for the consumer. We need to subsidize public healthcare services and one way to ensure that is infrastructure upgrades, both at the front end and back end. There is thus, an imminent need to adopt latest technology, rethink the existing procedures to make the ecosystem of insurance more friendly and approachable for all.

A Change in Outlook

The major shareholders and influencers of the health insurance market can initiate change that encourages a technology-enabled standardized, reliable and thus, profitable process of claim settlement. They are in a favourable position to make strong, targeted efforts in providing a comprehensive and approachable healthcare to the citizens. It can be a step forward in reducing the current high disparity between the investments made and the returns received annually.

Cashless Health Insurance facilitated through technology – The future

Cashless health insurance for the patient eliminates stress during medical emergencies, as he/she is not required to make any major payments towards hospitalization from his/her pocket. For hospitals and insurance companies, cashless health insurance ensures efficient utilization of resources.

Various governmental health schemes have embraced technology to make the claim settlement process paperless, fast and simpler for its beneficiaries. Technology platforms have been adopted to shift the entire data collection and records maintenance process from a manual one to an electronically readable one. This has resulted in substantial improvement in operational efficiency of these schemes. They have been able to improve the turn-around-time of the claim settlement process drastically while minimizing expenses on maintaining warehouses and physical copies of records. Accuracy in maintaining records and real-time monitoring of the process enabled them to expedite claims settlement, thereby ensuring that more people benefit from this initiative.

The successful model of cashless healthcare insurance facilitated through standardized technology platforms adopted by various Government schemes such as the Vajpayee Arogyashree, Rajiv Arogya Bhagya and Jyothi Sanjeevani Scheme in Karnataka and Tamil Nadu Chief Minister’s Comprehensive Health Insurance Scheme could be replicated by other states as well to take the Indian healthcare industry to the next level. Karnataka government’s recently launched Rajiv Arogya Bhagya Scheme is the first of its kind in India to provide cashless healthcare insurance to Above Poverty Line (APL) citizens of Karnataka – about 33 lakh families. These schemes not only provide appropriate health cover to Indians but being supported by technology, they ensure a process that is standardized, transparent and reliable. For the healthcare insurance industry to succeed and cater to the growing needs in the near future, integration of technology at the back-end and front-end, a supportive regulatory framework, and bridging the divide across all organizations would be the key driving force.



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