Business Standard B-School Project Awards 2011

1. B – plan
Two rupee per day Health insurance
Presented By
Arul Vel Arasan C
Indian Institute of Foreign Trade, Delhi
Email: arulvelarasan@gmail.com
Phone No: 7838843825

2. BUSINESS OVERVIEW
BUSINESS PURPOSE
To provide health insurance to rural and semi-urban people and improve their standard of living by
offering it at Rs.2 per day per person, but at the same time covering all the expenses they would incur
without any hidden clauses
BUSINESS PHILOSOPHY
Living healthy is a human right and it should be enjoyed by all human beings irrespective of their
financial status and behavioral characteristics
ORGANISATION
The organization is a health insurance provider for people living in the rural and semi urban regions of
our country
CONCEPT DEVELOPMENT
Economic condition Easy curable treatments The Model
• It is not the lack of health care supply • It is for instance common for aged • The law of large numbers being
that leads to unfavourable health men to suffer from kidney failure for effectively used to provide a high
status of the poor, but rather their want of a simple prostrate degree of health security to the poor
inability to pay for quality care operation, or from premature population in India
• Insurance promises to be a viable blindness that is easily rectifiable by • So providing health insurance
solution a cataract extraction procedure depends less on resources and more
• Similarly appendicitis, diseased on mobilizing capacity and
uterus etc. could be cured organization

3. PRODUCT AND SERVICE
FEATURES PRODUCT DETAILS WHAT IS NOT COVERED?
Type Self-funded Preexisting War, invasion Artificial limbs
Group or Individual Household Intentional injury Alcohol abuse HIV related
Term 5 years Fertility related Transplants Weight reducing
Mental illness Birth defects Vaccination
Age 6 to 59 years
Plastic surgery Hazardous sports Joint replacing
Premium Collection mode Weekly/Monthly by a person
Burn cases Vitamins, tonic Malignancies
Pricing – premium Rs. 2/day/person
Cosmetic surgery Skin grafting Angioplasty
Insured sum Rs. 1 lakh
Normal delivery Implants
SERVICES OFFERED TREATMENTS COVERED
Free transportation No hidden clauses
1600 surgeries
Voluntary check ups
Pregnancy – caesarean
No reimbursement Standardized
All Medicines covered procedure, Directly treatments and
Eye – Cataract paid by the insurer claim process
No tardy reimbursement
Hearing aids – operation
Hospital charges
Dental – operation
Diagnostic service USP
Hassle free claim process OPD

4. COMPETITIVE ANALYSIS
Competitor ICICI Lombard Bajaj Alliance Apollo Munich
Products Family Floater Individual/ family/ star Easy health Individual and
package Easy health Family
Market share 9.52 % of Health Insurance 8.63% of the 5% of the market share
holders market share
Infrastructure 4000+ Network Hospitals 2300 Empanelled hospitals 4000 Hospitals & 1800
Pharmacies
Benefits Tax Benefits & OPD In-House Claim 100% Lifelong renewal.
Coverage administration. Over 80% of the existing
Hassle free. Star Package. customers renew .
Life + Health Insurance
Drawbacks Higher rejection rate of the Restrictions on value of Amateur customer
claims sum insured support
Sales Method Unsolicited Calls, News Agents and Online – Paperless
and Advertisement Salesmen
Reputation Healthy backup of General Second largest company in Own reputed Apollo chain
Insurance Health Insurance sector of Hospitals
Source: IRDA

5. CURRENT MARKET STRUCTURE

6. INDUSTRY – HEALTH INSURANCE
CURRENT INDIAN SCENARIO MARKET OPPORTUNITY
India spends 4.9% of GDP on health with public Less than 10% of people have access to health
expenditure of 0.9% and private expenditure of insurance, a majority belong to organized sector
4.0%
Health insurance market grew at a rate of 40% in the
In private expenditure, out-of-pocket expenditure is three years following 2006 and presents the fastest
3.6% and employees /community financing is 0.4% growing market in the general insurance
The central budgetary allocation has been stagnant An exploration of 35% over the next years is seen as
at 1.3% while in states it has declined from 7.0% to realistic
5.5%
The per capita total expenditure on health is US$ In India, its large informal sector accounting for 90%
23, of which the Government expenditure is US$ 4 of population contributes 40% of the nation’s GDP
The government health centres address primary
A study of claims found that 22% of total claims healthcare needs, but lack the facilities, cohesion,
were for communicable diseases solidarity to provide satisfactory surgical treatment
Commercial insurance shows little interest in
providing health insurance for rural informal sector
since it has low profitability and high risk
Source: WHR, Bhat, Gumber

7. INDUSTRY – HEALTH INSURANCE
REGULATIONS PEOPLE ISSUES
Regulatory body in India – IRDA (Insurance More than 40 per cent of hospitalised Indians have
Regulatory and Development Authority) to borrow or sell assets to meet hospitalisation
costs
People pay very high interest rates on the money
Minimal capital requirement of Rs. 100 crore they borrow, it is estimated that around 25 per cent
of hospitalised Indians become poor in a single year
Certificate requirement for agents - Rs. 250 for On average, individuals in the poorest quintile of
renewal or issue of license, 12th grade standard India are 2.6 times more likely than individuals in
passed, 120 hours practical training the richest quintile to forgo medical treatment
Lack of regulations and control on provider Issue of accessibility – majority of poor are in
behaviour remote rural areas where no facilities are available
Currently there are no mechanism or infrastructure The claims ratio is growing at a fast rate allegedly
for collecting mandatory premium among the large because of collusion between the
informal sector patients, insurance agents and hospitals
No standard procedure for treatments and claim Patients experience problems in reimbursements by
process long delay and partial reimbursements
Source: WHR, Bhat, National sample survey

8. TARGET
MAJOR TARGET
-> People in rural and semi-urban areas with low income but not very poor – family income
above Rs. 3000 per month
-> People majorly associated with Industries and Co-operative societies since 67% of the
rural households belong to a co-operative society
FOCUSSED TARGET – SALEM IN TAMILNADU
MAP – SALEM KEY STATISTICS – SALEM
Population 34.8 lakhs
Total workers 14.5 lakhs
Health centers 70
Factories 1242
Co-operatives 232
Health insured <5%
Preventable >20%
No. of Villages 144

9. MARKET RESEARCH
On People RESEARCH OBSERVATIONS
• Sample size: 40 • People with no idea about health insurance – 55%
• Willingness to pay Rs. 2 / day – 35%
• Methodology: Depth interview • They all prefer private facilities
• The costs of even minor health problems is unaffordable
• Place: Salem • Travelling long distance costs which is a very big problem
• It is expected that better information will make all clients
• Participants: People join voluntarily
On Hospitals RESEARCH OBSERVATIONS
• Sample size: 12 • Research conducted on the hospital revealed something
different: a number of hospitals throughout Salem
• Methodology: Depth interview experienced poor utilization rates, as low as 40%
• So it is not improper health infrastructure, but insufficient
• Place: Salem financial means that hindered the poor people
• Network hospitals that meet the standards are often
• Participants: Doctors and located in the district
workers in hospital • Hospitals in the taluks does not have the quality expected

10. ORGANIZATION AND MANAGEMENT
BUSINESS SETUP IN SALEM Same setup in all other 20 regions
OFFICE
S
VEHICLES
SETTING
• 10 rental offices with 1 as • 10 vehicles of our own to • 2 Computer and 2 phones in
head office take patients during each office
• Electricity and maintenance emergency • Furniture, Printing,
Stationery
KEY MANAGEMENT
Chairman & CEO Chief Marketing Chief Operation Chief Technology
Director
officer officer officer
• Responsible for all • Responsible to get • Design overall • Design business • To solve all IT
managing activities business tie ups marketing strategy operation model related issues
WORKFORCE IN SALEM Same Workforce in all other 20 regions
Employees Workers Doctors Manager
Number 30 20 10 10
Qualification Any degree Not required Medicine degree M.B.A.
Skill sets Communication skills Laborious work Medical knowledge Managerial skills
Roles Front end to enroll To carry all activities Adopting standards Business activities

11. BUSINESS DELIVERY MODEL
District Head Office
• It is responsible for all activities of the towns and covered villages
• All the strategy and decisions to be followed in the sub offices are declared here
• Recruitment for all the Departments is also done here
Team of Doctors
• Define the standards for treatments and claims under the advise of one senior most doctor
• All the strategy and decisions to be followed in the sub offices are declared here
• They also work in tandem with the doctors in networking hospitals
• They decide the methodology of treatment, medicines and prepare a Standard Rate Sheet which is in average
30% less than charged by other hospital
• They also ensure that no patient is kept in ward for more than the required number of days
Activities
• Training – 120 hours of training to the agents and sales people, and review every 3 months
• A senior person from Marketing department will approach the SSI, MSI and cooperatives and initiate the tie up
• Payment collection – Weekly / Monthly 1 person for every 10 cooperatives and the registry is done in PDAs.
People don’t feel the burden of paying.
Third Party Administrators
• Process the Claims
• Database Management, Biometric detail collection, Co-ordinates all network hospitals

12. OPERATIONS
Enrollment of New Hospitals
Hospital submits Application/ We approach
BENEFIT FOR THE HOSPITAL
them
The occupancy rate in the
Inspection by our set of Doctors hospitals will increase and also
the Brand image
Doctors report in a prescribed format
Our Board of Directors makes final decision
Hospital signs an agreement
Policies, Terms Information to our set Records to be
& Conditions of Doctors Maintained
KEY POLICIES A standard procedure adopted by our team of Doctors for treatments has to be followed
The rate quoted is 30% less than that of the average rate for all the standard operations

13. THE CLAIM PROCESS
Illness of Insured Patient
USP
Call to 24 X 7 toll free number
No money is collected from the patient
once the treatment is ratified to be
Client chooses network under coverage and no tardy
Hospital with biometric card reimbursement procedure
Patient taken to hospital by
free transportation
Admission for Surgery
Yes
Hospitalization and No Doctor examines the
Surgery not covered patient and checks
Free Operation
whether the Claim
Patient has to Spend comes under
his own money coverage Beneficiary leaves Hospital
Patient leaves TPA
Hospital Hospital Sends claim
Documents to TPA
Bill paid by the
company

14. RATE SHEET – KEY OPERATIONS
The rates are standardized to 30% lesser for all the operations done in the Hospitals

15. MARKETING STRATEGY
AWARENESS PROGRAMS
Dramas Local TV Ads Local Newspaper Wrappers of local
products
PROMOTION CHANNELS
Co-operatives and Banks and Microfinance Post Office Referrals
Communities institutions
SALES TEAM
• One sales person will handle 10 cooperatives
• At least 5% of the total workers in cooperatives or Industry is to be tapped
• So a total of 116 cooperatives has to be tapped in the initial phase.

16. RISK MITIGATION STRATEGIES
• Filing claims for medications not received
• Using someone else’s coverage or card • Unique biometric card is given to everyone insured
• Strict verification is done to identify authentication of
claims
• Opportunistic frauds by inflating claims
• Inflating through insider contacts • The standards are set by our own Doctors and not by
the networking hospitals
• The claim amount is also directly paid by the insurer
• The model works only if the insured claims for
Operations and does not make too many claims • Cannot claim for the next 6 months after a claim
for OPDs and frequent claims are avoided
• Also there will be a reimbursement if no claims are
made at the end of 5 years
• Poor sample selection of unhealthy people • Preexisting diseases, more than 59 years not
• Communicable diseases covered, and also whole family is insured
• Awareness of cleanliness, sanitation and voluntary
check up once in 6 months

17. REVENUE STREAMS
Key Assumptions & Projections:
2013 2014 2015 2016 2017
Number of regions covered 1 - Salem 5 10 15 20
Number of customers 70000 350000 700000 1050000 1400000
• From past data 1% claim operations – Average cost is Rs. 22000/operation
Claims
• Assuming 2% claim for Outpatient care – Average cost is Rs. 1000/OPD
• The IT development and maintenance is outsourced to Indus software Ltd.
IT outsourced
• Development and support for first year, from second year only support service
Commission paid • 5% of the premium paid to the agents, Referral, Banks, Post Office etc.
• It involves – Training cost, Salary, Voluntary check ups, conveyance, Rent &
Operating expenses
Maintenance, Stationery, Communication, Legal, Marketing & Ads, Interest
• The back side of the biometric card given to them is used to generate
Income from Ads
advertisement
Depreciation, Interest • The depreciation is 10% of the fixed assets
expense • EMI of 16.27 crore is paid annually for the loan amount of 100 crore

18. FINANCIALS
Profit & Loss Statement In Rupees (lakhs)
Particulars 2013 2014 2015 2016 2017
Premium earned 511 2555 5110 7665 10220
Interest earned 24.5 122.6 245.2 367.9 490.5
Total revenue 570.5 2852.6 5705.2 8557.9 11410.5
Claims settled 168.0 840.0 1680.0 2520.0 3360.0
Commission paid 25.5 127.7 255.5 383.2 511.0
Employee cost 81.6 448.8 987.3 1629.1 2389.4
IT cost 50.0 50.0 100.0 150.0 200.0
Third party administration 7.0 35.0 70.0 105.0 140.0
Other operating expenses 57.9 251.5 513.1 764.3 1091.4
Total expenditure 390.0 1753.0 3606.0 5551.7 7691.9
EBITDA 180.4 1099.5 2099.2 3006.1 3718.6
EBIT 171.0 1052.5 2005.2 2865.1 3530.6
Profit after tax (1455.9) (574.4) 264.7 866.7 1332.5

19. FINANCIALS
Balance Sheet In Rupees (lakhs)
Particulars 2013 2014 2015 2016 2017
Share capital 2000.0 2000.0 2000.0 2000.0 2000.0
Reserve and surplus 2200.0 2200.0 2464.7 3331.4 4664.0
Total Debt 10000.0 8373.0 6746.0 5119.0 3492.0
TOTAL LIABILITIES 14200.0 12573.0 11210.7 10450.4 10156.0
Investments 153.3 766.5 1533.0 2299.5 3066.0
Loans 102.2 511.0 1022.0 1533.0 2044.0
Fixed assets 94.0 470.0 940.0 1410.0 1880.0
Cash and balances 13850.5 10825.5 7715.7 5207.9 3166.0
TOTAL ASSETS 14200.0 12573.0 11210.7 10450.4 10156.0
Funding • Loan borrowed at 10% interest rate
Investments • Invest 30% of the premium for 8% return in 1 year government bonds
Loans • Lend 20% of the premium for 12% interest
It is expected to break even in a period of 10 years by settling the entire loan amount

20. THANK YOU