Health Insurance: Are We Covered?

Health Insurance: Are We Covered?


Out of pocket contributed to 51% of total healthcare expenditure in India. This is the highest among comparable economies where the range is 10-30%.

Despite continued efforts to expand healthcare coverage through PMJAY, CGHS, ESIC schemes, govt spend on healthcare still stands at ~2% of GDP. Moreover, health insurance penetration in India stands at only 37% (incl. state sponsored schemes). Penetration in the low-income segmentis improving through the government’s PMJAY scheme, however middle-income population remains severely underpenetrated.

While most developing / developed economies have achieved Universal Health Care, largely driven by government push (The United States being an exception), Indian landscape presents unique challenges limiting possibility of standardized terms and premium pricing in insurance,e.g.,

  • Unclear demarcation between secondary and tertiary care facilities, leading to inefficiency and high costs of relatively simple procedures
  • Lackof standardized pricing and billing mechanisms, resulting in long settlement timelines for claims
  • Limited alignment between stakeholders on investments in digitization and interoperability, further complicating cashless journeys and claims settlement

This uniqueness presents an opportunity for insurers and distributors to create a truly “retail” solution for 500mn+ individuals.

We believe that by systematically targeting keysegments and pain points, India has the potential to reach 70% health insurance penetration and $16B in premium (from $8B at present) in the next decade.[1]

We see 3 key areas for innovation where startups and existing players can create an impact:


Key Characteristics:
  • Largelycovered by group insurance – however coverage amounts are usually inadequate
  • Willingnessto pay extra for comprehensive coverage / desired inclusions
  • High awareness  
Existing Distribution (Omni-channel):

PSUs largely occupy market leadership incorporate group policies, SAHI’s lead the agent led retail distribution and general insurers have championed bancassurance channel. New age start-up insurers such as Digit and Acko began with D2C distribution and now rely on agent / broker partnerships for growth

Gaps in existing products:

While tailored coverage (elder insurance, cancer coverage etc) and comprehensive coverage including OPD have been introduced, several pain points persist[Exhibit 2]

Possible business models / solutions:

We believe that product innovation needs to address coverage and experience, along with creating higher potential value for insurers:


The missing middle constitutes the self-employed (agriculture and non-agriculture) in rural areas, and a broad array of occupations – informal, semi-formal, andformal – in urban areas.

 Key Characteristics:
  • Usually not covered under group policies
  • High willingness to buy insurance but low propensity to pay
  • Low awareness of available products
Possible business models / solutions:

Innovation on distribution as well as pricing will accelerate penetration in this segment: 


Current landscape:
  • While claims settlements ratios are 90%+ for the industry, settlement values are under 74%, driven by: Lack of clarity of terms or “default rejection” for certain types of claims, instances of fraudulent claims and overstated claim values
  • Insurers prefer to process high value claims in-house (42% claim values processed in-house instead of using a TPA), resulting in added cost of operations for the insurers  
Key pain points across stakeholders:
  • Patients: Lengthy and complex documentation process both in cashless as well as reimbursement routes, with no visibility of recoverable amount in case of reimbursement
  • Providers: Long cashless claim settlement cycles (up to 90 days) involving several iterations on documentation
  • Insurers: Fraudulent claims (low value and high volume) – go undetected at TPA desks due to certain STP protocols
Possible business models / solutions:

AI / ML led models can complement existing solutions to benefit stakeholders across the value chain [Exhibit 7]. Lastly, we believe that insurer-facing (rather than customer-facing) solutions are likely to see higher traction here.

We believe that with tech enabled innovations across product, pricing and distribution, the Indian health insurance sector is waiting to flourish.

We at Sorin Investments are bullish on health insurance and allied sectors in India. If you are a founder in the space or a fellow investor looking to brainstorm, feel free to reach us on and

(1) Sorin Estimates

Following is a non-exhaustive landscape of enterprises and new age start ups building in the space: