Private health insurance premiums in emerging markets are ‘set to double' by 2020 as people want and can afford more healthcare, according to analysis.
Swiss Re's study Keeping healthy in the emerging markets: Insurance can help said as income levels in regions rise, there is a greater demand and expectation for better health services.
Additionally, people spend more on healthcare services to improve their quality of life.
Swiss Re defined emerging markets as Latin America, Central and Eastern Europe, Emerging Asia and the Middle East and Northern Africa (MENA) regions.
The study also said 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 emerging markets, the money to pay for healthcare has traditionally come from the government via taxation revenues and from private individuals, the report highlighted.
However, reliance on these two channels of healthcare financing is becoming "increasingly challenging", the study warned.
There are growing strains on public finances and more advanced technologies and medicines pushing up the price of healthcare services.
For governments, private health insurance has the potential to be a main channel of healthcare expenditure.
However, in 2012, private healthcare covered less than 10% of total healthcare spending in the main emerging markets.
Demand
The report said: "On the supply side, PMI can bring innovation across the value chain in healthcare - product development, sales and distribution, underwriting, claims, payment systems and customer services, leading to better services at lower cost."
Clarence Wong, co-author of the study said: "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."
One example given by the study was the launch of a mobile health insurance scheme in Nigeria called Y'ello Health in 2014. 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."
Reimbursement vs fixed benefit
Meanwhile, premiums from reimbursement products grew by an estimated 11.2% in real annual terms between 2003 and 2013. They are forecast to rise on average by 9.6% per year to 2020, three times the rate of global premium growth.
Premium data on fixed-benefit products in the emerging markets is scarce, but interviews conducted for the study suggest that demand for fixed-benefit PHI products is also growing rapidly, Swiss Re said.
The private health sector is at varied stages of development in the emerging regions due to the different structures of national healthcare systems and health infrastructure.
In Emerging Asia, many governments have "earmarked reimbursement products as a growth area, and premiums are forecast to grow by 15.4% annually between 2013 and 2020, the strongest of all the emerging regions."
Swiss Re also highlighted that fixed-benefit products are popular. For example, cancer insurance has attracted widespread interest in many markets in the region following the success of cancer products in South Korea and relapse products in Japan.
In Latin America, premiums from reimbursement-type products grew by a real annual growth rate of 6.8% from 2003 to 2013, and are forecast to average growth of 6.2% to 2020.
In terms of fixed-benefits, critical illness solutions are "developing favourably" although lack of consumer awareness remains a key obstacle.
Hospital cash insurance, another fixed-benefit product, has become increasingly common as part of bancassurance offerings, the report said.
Against relatively comprehensive coverage of social security benefits, overall private health insurance penetration is low in Central and Eastern Europe, the research found.
PMI is mainly used to pay for advanced and additional treatments not covered by the public healthcare systems. Critical illness products are widely available as riders to endowment and unit-linked insurance policies, and as stand-alone solutions. Hospital cash insurance is also popular.
In Sub Saharan Africa, "private out-of-pocket payments from household savings" are a main component of total healthcare spending.
The PHI sector remains small, however microinsurance is expected to become a main channel of healthcare expenditure in many of the region's markets, the research concluded.
