sigma 01/2015: Keeping healthy in the emerging markets: insurance can help
As income levels in emerging markets rise, people spend more on healthcare services as a means to improve their quality of life. This is driving demand and expectations for better health services in the emerging markets, says Swiss Re's latest sigma study Keeping healthy in the emerging markets: insurance can help. The study shows the 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.
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Growing affluence gives rise to heightened expectations as to the quality and range of healthcare services available. The latest sigma study, Keeping healthy in the emerging markets: insurance can help (see download box at right), assesses the development of healthcare services and insurance in emerging markets.
Among other issues, the study explores the utility of private insurance in helping consumers access services not covered by public-sector healthcare systems, and to pay for treatments supplementary and/or complementary to those available from state-sponsored schemes.
Demand for private health insurance growing
Tradtitionally, the money to pay for healthcare in emerging markets has come from the government via taxation revenues and out-of-pocket contributions from private household savings. However, reliance on these two channels of financing is becoming increasingly challenging, given mounting pressures on public finances and as advancements medicine and treatment options push up the cost of care services. And this raises questions as to the sustainability of existing channels of financing for healthcare services.
Private health insurance (PHI) is an alternative and efficient financing mechanism, and in the emerging markets, demand for private health insurance is growing rapidly. Premiums from private medical insurance products grew by an estimated 11.2% in real annual terms between 2003 and 2013, and are forecast to grow by about 10% each year to 2020, a function of economic growth and rising wealth in these markets.
Key for sustainable healthcare systems
PHI offers consumers financial protection against future care-related expenses at affordable regular premiums, relieving the burden of large one-off hits to private savings. It also offers more choice with respect to place, type and level of treatment, and, with certain products, gives consumers freedom to choose how to use the benefits received. On the supply side, meanwhile, PHI can bring innovation across the value chain in healthcare, including in product development, distribution, underwriting, claims and customer services, leading to better services at lower cost.
Keeping healthy in the emerging markets: insurance can help shows how the insurance industry is well equipped to meet the rising healthcare spending needs and desires of the increasingly affluent populations in the emerging markets. Consumers want and are able to spend more on their health as their incomes grow. Governments and insurers can harness this energy to make PHI a central pillar of financially sustainable national healthcare systems.