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FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Ishrat Rasool
Research Scholar, Department of Health Management, Jamia Hamdard (Hamdard University)
Delhi
email: ishratrasool01@gmail.com
Professor Dr. PS Raychaudhury
Professor, Department of Health Management, Jamia Hamdard (Hamdard University) Delhi
Abstract
India has been working on financial inclusion since its independence but still staggering.
Many efforts and plans were made to make financial inclusion successful, the banking sector
was in focus to make people aware of the financial products and their benefits, banking
models were introduced, branches were increased so on and so forth. Healthcare expenditure
is one of the most important points to be considered as every person has some kind of health
expenditure whether poor or rich. The objective of this paper is to assist the health planners,
insurers, government officials and other private officials concerned with the insurance sector
and healthcare sector to understand the need of insurance and its impact on financial
inclusion. Indian public sector spends very less percentage of GDP on healthcare sector
which increases out-of-pocket expenditure and decreases per capita income. Financial
inclusion through Insurance can only be achieved after increasing insurance literacy rate and
proper implementation of plans and schemes introduced. An efficient healthcare budget with
appropriate utilisation and management should be in focus.
Keywords: Financial inclusion, Insurance, Healthcare Expenditure, Insurance
Schemes and budget allocation.
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Introduction
Financial Inclusion which is also known as inclusive financing means access to useful and
affordable financial services at affordable costs to the marginalized and weaker sections of
society. Financial inclusion attracted the global attention in the recent past and is a buzzword
now. It all started with the Finance Minister's budget speech in the year 2013 and financial
inclusion is the buzzword everywhere in the country today. The need for financial protection
is paramount for the underprivileged sections in India as these sections do not actually have
any protective financial umbrella in an emergency situation. Before going into the Financial
Inclusion we must know what is Financial Exclusion? Financial exclusion is the inability of
individuals, households or groups to access financial services in an appropriate form. This is
the main obstacle for accessing the broader economic opportunity and increases the risk of
poverty.
Every sector and industry in the economy can contribute to the promotion of financial
inclusion. The policy-making institutions and the authorities like the NABARD, RBI, IRDA,
Pension Fund Regulatory and Development Authority (PFRDA) have made many efforts in
terms of framing suitable regulations and guidelines for strengthening financial inclusion.
Policies towards financial inclusion have received global attention including developed
financial markets. There are concerns about those excluded from the financial/formal banking
system even in developed financial markets.
Insurance, a critical tool for not only reducing poverty but also for helping those who
have emerged from poverty to manage their risk and avoid falling back into it. Significant
technological advancements over the past decade have improved the design, selling, and
servicing of insurance products. All these significant changes provide opportunities to low
income group and marginalised sections for accessing insurance and to improve financial
inclusion, but these opportunities also present challenges and risks for supervisors. Although
some of these challenges are significant, so we must not lose sight of the impact we can have
by addressing them (Jonathan Dixon, 2014).
Literature Review
The private healthcare sector is the dominant healthcare provider in the country as India does
not have any Universal Healthcare system or National Health Insurance for all its citizens. In
India, the constitution grants free healthcare for all (Britnell, 2015). In fact, each district
headquarters in most states have one or more Government hospitals where everything from
diagnosis to medicine is given for free. In fact, most experts agree that building government
and public healthcare units across the nation is crucial to India's future and that private
insurance is probably not conducive to India's conditions. Private healthcare sector manages
more than the half of the healthcare in India. Most health care expenses are paid out of pocket
by patients and their families, rather than through insurance (Rajendran, 2017). This has led
many households to incur Catastrophic Health Expenditure (CHE) which can be defined as
health expenditure that threatens a household's capacity to maintain a basic standard of living.
(Sekher, 2011) According to the survey conducted for the Catastrophic Health Expenditure in
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
India reveals that over 35% of poor Indian households incur CHE, which reflects the adverse
state in which Indian health care system is at the moment.
Below table shows the percentage of households with catastrophic health expenditure
(CHE), as estimated from data obtained from five major household surveys conducted in
India since 2000.
NSS 2004-05
NSS 2009-10
WHS 2003
NSS 2004
SAGE 2007-08
0
5
10
15
20
25
30
35
40
45
50
Major household surveys
A I 95% con$dence interval
Households with CHE (%)
(Source: Bulletin of the World Health Organization, 2013)
The Government expenditure on healthcare sector as a percentage of GDP has been falling
over the years. This encouraged the private healthcare sector to flourish. So the low income
group/people from marginal sector of society living in poverty are left with fewer options
than before to access healthcare services.
Note: Expenditure 2009–10; SAGE 2007–08, Study on Global Ageing and Adult Health 2007–08; WHS 2003, World Health Survey 2003.
(NSS 2004, National Sample Survey on Morbidity, Health Care and the Condition of the Aged 2004; NSS 2004–05, National Sample
Survey on Household Consumer Expenditure 2004–05; NSS 2009–10, National Sample Survey on Household Consumer
A. Out-of-pocket payments equalling or exceeding 40% of a household’s capacity to pay.
B. Out-of-pocket payments equalling or exceeding 10% of a household’s total expenditure.
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Akila (2013) conducted an explorative study in which it was found that India's
potential for health insurance is highest because the insurance penetration is lowest compared
to western countries. Promotional strategies should be used to do mass marketing of
insurance including micro-insurance for BPL families. It will be very helpful for enhancing
the growth of this industry as well as financial inclusion indirectly. All the stakeholders like
health care providers and TPAs should work together to increase the health insurance sector
penetration in India
Taranikanti (2017) opined that insurance will help in financial inclusion as it will
increase share in GDP. It increases the share in savings and increase the level of coverage;
however there are some major issues like on-boarding of insurance, cost of insurance
services, capital requirements, financial literacy and regulatory interventions.
According to the World Bank (Govt. Health Sponsored Insurance Report 2011-12),
about 25% of India's population had some form of health insurance in 2010. In 2014, an
Indian government study found this to be an over-estimate, and claimed that only about 17%
of India's population was insured. Public healthcare is free for those who belong to below the
poverty line.
Kumar (2017) observed that Indians meet more than 62% of their health expenses
from their personal savings, called "out-of-pocket expenses", compared with 13.4% in the
US, 10% in the UK and 54% in China. The demand is growing day by day with the increase
in population as well as in expenses. The existing infrastructure of meeting healthcare
expenses is just not enough to cater to the growing demand.
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Problem Statement
Health insurance penetration and GDP of the country are connected to each other. The
majority expenditure in India for health care is "out of pocket expenses" so that people are
not able to increase their savings and standard of living. The intention of this research paper
is to investigate and study the issues related to buying of insurance policies and trying to
explore the scope of financial inclusion through insurance. How insurance can be the way for
financial inclusion? What are the bottlenecks? How can it be one of the remedies to improve
financial inclusion?
Research Questions
1. How can health insurance serve as a means to increase the financial inclusion in the
country?
2. Can accessibility towards financial inclusion be increased by health insurance?
3. What proportion of innovation in health insurance schemes can be accredited to
financial inclusion?
4. What type of concerns and issues are there related to health insurance and can these
issues be reduced by proper government mandatory regulations?
Research Objectives
1. To examine the extent of financial exclusion in India.
2. To understand the framework of financial inclusion policy and the phases of financial
inclusion in India.
3. To study various initiatives taken by the Govt. to address the financial exclusion.
4. To examine the current status and insurance sector literacy.
5. To examine Public-Sector health spending versus Total health spending.
6. To study various insurance schemes introduced for financial inclusion.
7. To study the overall impact on the out-of-pocket expenditure after implementation of
financial inclusion insurance schemes.
Research Methodology
The research conducted in this paper is based on the secondary data which is collected mainly
from the websites of WHO, IndexMundi, IRDA, CGAP and various other relevant journals
and reports. The methodology followed in this paper is to examine the financial exclusion in
India, steps for enhancing financial inclusion with help of insurance in India and effect on
GDP as a whole.
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Financial Exclusion in India
Financial exclusion remains staggering in India. A major proportion of the population of India
lives in villages and more than half of them depend on the agriculture. Only 5% of the
villages in India have commercial bank branches, so the number of bank accounts is also very
less as compared to the population of the country More than 50% of the population in India
does not have bank accounts. Farmers do not seek credit from financial institutions as they
hesitate due to lack of knowledge.
Various measures were taken by government policymakers in 1934. The RBI was
made statutorily responsible for this project in order to ensure that adequate credit is available
to the farmers for development of agriculture sector. The major initiative taken by the RBI
was nationalisation of banks in 1955 when Imperial Bank of India was nationalised; it
became State Bank of India. After this 14 major commercial banks were nationalised in
1969(Khetarpaul, 2015).
In subsequent years several measures were taken, such as the opening of bank
branches in rural areas, mandating banks to lend to the agriculture sector, small-scale
industries and small borrowers. The different schemes like Lead Bank Scheme, Integrated
Rural Development Programme and 20-Point Economic Programme were introduced.
According to the findings of RBI's 2009 High-Level Committee, the Lead Bank
Scheme has been a failure since a large section of the rural population and the urban poor do
not have access to banking facilities. So none of the measure taken till date has had much
impact.
Public sector banks continuously fail to achieve their loan targets for the agriculture
sector. Rural branches of banks were closed in the name of reforms. Almost 17 Crore
Accounts were opened recently under the lasts scheme introduced by public sector banks for
financial inclusion and it was praised for its success. But 50% of accounts are non-
operational. How can this be considered success?
The RBI and set up another committee to find out ways for accelerating the financial
Inclusion as Jan Dhan Yojana also failed to achieve the core objective. The committee
revived core mission of public sector banks and directed them to serve the weaker, poor and
marginalised and unbanked areas of society by lending them financial products at an
affordable interest rate and exclude the agents who charge higher rates.
The committee must assign this mission to the public sector because private sector
goals are fundamentally focused on profits rather than serving the poor. The committee also
laid emphasis mainly on the banking or credit aspect of financial exclusion and not on other
aspects of insurance, which we also stress upon in our analysis. Nevertheless, since banking
inclusion is a primary and inevitable step towards the broader process of financial inclusion,
data on the banking or credit exclusion can be regarded as a first-hand information on the
extent of financial exclusion.
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Framework and Phases of financial inclusion in India
First Phase:
The First Phase of financial inclusion started from the independence up to the year 1991
which can also be classified as the Post-Independence Period up to 1991. In this phase main
focus was on facilitating credit through proper channels to the neglected sectors of the
economy. Special importance and emphasis were laid on the weaker sections of society.
Second Phase:
The second phase of financial inclusion started from the early 1990s to March 2005, in this
phase, it was believed that strengthening of financial institutions could lead to financial
inclusion as credit and access to finance will be available to people if we focus on the
development of financial institutions. For the same different schemes and programmes were
introduced like SHG-bank linkage programme in 1990, NABARD introduced KCC cards for
farmers so that they can avail credit and Swarozgar Credit Card (SCC) for meeting working
capital requirements of small business owners and micro enterprises.
Third Phase:
In the third phase of financial inclusion which started in April 2005, ‘financial inclusion' was
explicitly made as a major policy objective (RBI, 2008). In June 2006 the Govt. of India
constituted a committee on financial inclusion under the chairmanship of Dr. Raghuram
Rajan to reduce financial exclusion and provide recommendations and frame guidelines for
financial inclusion. Based on his recommendations two finds were introduced financial
inclusion fund (FIF), to meet the development and promotional inventions and financial
inclusion technology fund (FITF), to meet the technology adoption costs.
Various initiatives taken by government:
The government recognised early the social and economic imperatives of broader financial
inclusion, so it started pursuing this goal with limited success. Initial efforts started with the
nationalization of banks, priority sector lending requirements, launching of Lead Bank
Scheme, the establishment of Regional Rural Banks (RRBs) and Service Area Approach.
(Mundra, 2014)
Despite all the above efforts, the extent of financial exclusion remained staggering. The
failure to achieve meaningful progress in financial inclusion forced the regulators and
policymakers to rethink the approach. So they redefined the financial inclusion and tried to
redirect the energies in the right way and in the right direction. RBI defined the Financial
Inclusion as "the process of ensuring access to appropriate financial products and services
needed by all the sections of the society in general and weaker sections such as low-income
groups particularly, at an affordable cost in a fair and transparent manner by regulated,
mainstream institutional players". Thus financial inclusion has two-fold objectives:
a) To connect the excluded with the formal banking system in order to help them to gain
an understanding of the financial services available and equipping them with the
confidence to make informed financial decisions.
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
b) Providing doorstep banking services to all the 6 lakh villages and meeting their life
cycle financial needs through appropriate savings, credit, remittance and insurance
products.
RBI followed a planned and structured approach to accomplish these objectives by tackling
the issues of demand and supply of financial services. Different schemes and programmes
were introduced by RBI and Govt. of India for enhancing the financial inclusion. The
Swabhiman scheme was launched in February 2011 to provide branchless banking.
UID/Adhaar which leveraged existing technological links to reach out to the unbanked
population and is actually promising bank accounts to the residents if they indicate consent to
open one. Direct Cash Transfer Scheme from January 2013 to transfer cash benefits and
subsidies directly to accounts of people without delays and leakages. No frills Account
introduced by RBI in 2005, KYC norms were simplified. The Bank-Led Model was
introduced by RBI with thrust on leveraging technology. As the success of Financial inclusion
firmly depends on the technology which enables the emergence of cost-efficient delivery
models.
BC network and Brick and Mortar structure extended and promoted financial
inclusion especially in geographically dispersed areas on the advice of RBI. In order to
provide efficient and cost-effective banking services in unbanked and remote corners of the
country. It also simplified the authorisation of branches, whereby banks do not require the
permission of RBI for opening branches in centres with a population less than 1 lakh. To
further step up the opening of branches in unbanked centres, banks were mandated to open at
least 25% of their new branches in unbanked rural centres (Mundra, RBI)
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Current status of the Insurance Sector in terms of penetration and density
(Insurance Literacy rate can be measured with help of penetration and density)
Insurance penetration and Insurance density are the two measures which reflect the country's
level of development of insurance sector. Insurance penetration is measured as the percentage
of insurance premium to GDP and insurance density is calculated as the ratio of premium to
population (per capita premium) sector in a country. A closer look reveals that insurance
penetration and density are somewhat proportional to the literacy rate in the concerned area.
(PolicyBazar, IHI Articles)For instance, India, counted among the countries with the lowest
general insurance penetration and density has a comparatively lower literacy rate (73%)
compared to that of US (99.0%) and UK (99.0%). The same thing is noted in state wise
analysis. Delhi, possess the highest penetration, which reflects as one of the highest literacy
rates in India (86.34), while Bihar with the lowest insurance density bears the lowest literacy
rate in India (63.40).Currently, India's Insurance penetration stands at 3.44 in 2015 compared
to 3.33 in 2014 and Insurance density at 54.7 USD.
Insurance penetration across different countries
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Insurance Density Across different Countries
The below graph shows that the level of Insurance penetration and Insurance Density is
declining since 2009, reached a high of 5.2 during 2009. Insurance density too reached 64.4
USD a high during 2010 and since then it is in a constant decline.
Insurance Penetration and Insurance Density Trends
Source: IRDA Annual Report 2015-16
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Insurance Total Premium
Source: IRDA Annual Report 2015-16
The below table shows the distribution of households by the type of insurance held.
According to the definition of the ‘insured households’ adopted for the study by IRDA, the
table reflects 100 per cent life insurance for the insured households and no household among
the uninsured has life insurance cover for any of the family members. It is noteworthy that
even among uninsured households (those without a life insurance policy), some have opted
for other kinds of insurance while the proportion of uninsured households opting for
insurance is much lower than insured households.
Distribution of household by the type on insurance held
Type of insurance Insured % Uninsured%
Rural Urban All Rural Urban All
No insurance - - - 88.01 89.11 88.67
Life insurance 100.00 100.00 100.00 - - 0.00
General insurance 2.89 4.82 3.84 0.62 0.65 0.64
Health insurance 5.27 6.59 5.92 0.56 0.44 0.49
Motor insurance 26.41 35.56 30.90 5.16 6.79 6.13
Tractor Insurance 2.53 0.87 1.71 0.46 0.17 0.29
Livestock Insurance 0.33 0.32 0.32 0.19 0.08 0.12
Accident Insurance 1.81 1.52 1.66 0.40 0.25 0.31
Crop insurance 2.49 0.29 1.41 0.62 0.10 0.31
Pump Insurance 0.06 0.01 0.04 0.46 0.27 0.35
Any other insurance 0.42 0.76 0.59 0.71 0.19 0.40
Source: Insurance Awareness survey, IRDA 2011
Note: These are multiple responses and therefore the sum may not be equal to
hundred
It is very important to increase to the proportion of health insurance; among both the
categories insured and uninsured health insurance percentage is less compared to motor
insurance and life insurance.
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Comparative study for examining Public-Sector health spending versus Total health
spending in BRICS.
Much has been discussed about India's healthcare system, its creaking facilities, its shortage
of doctors, its lack of insurance coverage and the rising burden of non-communicable
diseases. In a nutshell, India's healthcare system needs a systematic process of reform and
renewal that will take more than a few budget announcements to achieve. However, a budget
serves to provide a direction to a sector and lays ground for the government to position most
of its initiatives and measures (taken around the year) towards this direction.
In last 67 years since Independence, India has come a long way while fighting with
key indicators of health like Maternal Mortality Rate (MMR), Infant Mortality Rate (IMR),
child malnutrition, but still, healthcare sector requires huge investment from both public as
well as private sector (anonymous, 2011).
In India, the healthcare sector is considered as one of the biggest sectors in terms of
both revenue and employment. By 2020, Indian healthcare sector is predicted to grow by $
280 billion. However, the country is lagging behind in same.
The Indian healthcare system, hospitals and clinics are clustered on one hand and
unaffordable on the other hand. Due to this huge difference, it has created a vacuum in the
industry which has further created an evident divide.
The one of the biggest challenge that health sector faces each and every day is poor
healthcare infrastructure. India's health infrastructure is poor when compared to other
developing and large countries. To fulfil country's healthcare demand, India needs to add
more beds to its hospitals as the country has one bed for every 1,050 patients. Many
healthcare advocates have raised the issue of India's minimal spending of its GDP on
healthcare sector which has further made it difficult for public hospitals to provide quality
services (Shaikh, 2017).
Also, the expenditure in healthcare technology and IT is very low in India. The
hospitals in India need to increase their investment considerably in IT to provide improved
and patient-centric service. Investment in Indian healthcare sector is the need of the hour.
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
The below graph shows the comparison between the BRICS, India has highest Out-of-pocket
payments among other nations.
Last decade data aggregated to calculate percentages (2005-15)
Brazil Russia India China South Africa
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
33% 34%
67%
38%
9%
67.10% 66.00%
33.30%
61.68%
90.80%
Public Sector Spending and Out-of pocket spending
Out-of Pocket Expenditure Public Sector Spending
Source: WHO NHA database 2017
In last one decade, it has been observed that India Spends very less on healthcare as
compared to other countries. China being the most populated country in the world has public
spending percentage greater than India. Out-of-pocket expenses mean savings are less as well
as public spending is also very less which causes a decrease in per capita income and
adversely affects GDP.
Every country forms a budget plan and disburses funds to every sector, in India
budget allocated to healthcare sector is very less that is only 1.2% of GDP while as China
spends 3% of GDP on healthcare. As per the reports of World Health Organisation (WHO),
India is at 112 positions out of 170 countries in terms of its healthcare systems.
Various schemes introduced for financial inclusion
Over last one-year government introduced various insurance and social security
schemes to increase the insurance density and insurance penetration with an objective of
broadening financial inclusion in India. (Department of Financial Services) The various
financial inclusion schemes in the form of insurance, pension, savings account and others
were launched:
Pradhan Mantri Suraksha Bima Yojana: It is considered to be the cheapest accidental
death cum disability insurance policy with an annual premium of just INR 12, it has received
a massive positive response from the most of Indians. Insurance cover is small amount INR
2, 00,000 for accidental death and INR 1, 00,000 for partial disability but considering the fact
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
that nearly 80% of the population do not have any insurance (NSSO survey,2016), the
scheme has evoked a very good response as it will further increase the insurance penetration
to remotest locations of India.
Pradhan Mantri Jeevan Jyoti Bima Yojana: Similar to PMSBY, PMJJBY is also the
cheapest life insurance policy with an annual premium of INR 330 and moreover, it does not
require a medical examination. The cover offered under the yojana is INR 2, 00,000 and the
termination of policy takes place after the policyholder reaches the age of 55 years.
The objective of both PMJJBY and PMSBY is to provide financial security to the family of
the policyholder in an event of his/her death.
Atal Pension Yojana: This pension scheme was launched with a sole purpose of providing
pension to the workers from unorganized sector after the retirement to meet their daily needs.
Contribution can be done monthly/quarterly/every 6 months and an equal amount will be
contributed by the government of India with an option to prematurely exit from the scheme
before the age of 60 years. Pension amount receivable would be in the range of INR 1,000-
Rs.5, 000.
Jeevan Suraksha Bandhan Yojana: This scheme is a Raksha Bandhan gift and is launched
with an objective to drive PMSBY and PMJJBY. Through this yojana, brothers can gift social
security schemes to their sisters by purchasing a gift card worth INR 351 and deposit scheme
worth Rs. 201 which will be used for making the premium payment for Suraksha Bima
Yojana and Jeevan Jyoti Bima Yojana. Apart from this, term deposit scheme worth INR 5001
can also be taken which will serve two purposes – premium payment for PMSBY and
PMJJBY for the first year and remaining money would be an investment for term deposit for
10 years.
Pradhan Mantri Jan Dhan Yojana: Opening zero balance saving account for every
unbanked Indian household was the main objective behind the launch of PMJDY. Overdraft
facility of INR 5,000 is also available provided the account is kept active for 6 months after
opening. Some banks are also opening an account to existing customers whereas the majority
of them have restricted to only those with no bank account.
Sukanya Samriddhi Yojana: With a mission to secure the financial future of the girl child,
this small savings scheme SSA – was launched under the Beti Padhao Beti Bachao initiative.
For the current year i.e. 2015-2016, the interest rate offered is 9.2%. For e.g. in this scheme,
if you invest Rs. 20,000 for 14 years, the maturity amount will be INR 10, 67, 528 (assuming
9.2% interest).
Parents or local guardians can open an account in the name of the girl child at post
offices or various banks designated by Reserve Bank of India. Moreover, the interest income
and investments are eligible for tax deduction under section 80C of Indian income tax act,
1961 and the scheme mature's once the girl child reaches the age of 21 years. For opening the
account, an initial deposit of INR 1,000 has to be made. And next year onwards, the deposit
can be made for the amount ranging from INR 100 to INR 1, 50, 000. Premature withdrawal
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
is possible only when a girl gets married before the maturity. The interest rate would be
declared by the government every year. When the scheme was launched in the year 2014-
2015, the interest offered was 9.1%.
Impact on the Out-of-pocket Expenditure after implementation of insurance schemes
The below graph shows the impact of insurance schemes on the healthcare expenditure. The
trend line in the graph depicts that public healthcare financing schemes are very helpful in
covering the Out-of Pocket expenses for healthcare.
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0
20
40
60
80
100
120
India- Current Healthcare expenditure
India- Out-of-Pocket expenditure
India- Financing healthcare expenditure through Insurance Schemes
Government Schemes
Linear (Government Schemes)
Source: WHO NHA database 2017
The graph shows that there is comparatively increase in the government spending in year
2015. Though many insurance schemes are introduced, people are not aware of the schemes
and benefits so they are not availing those schemes. Government and other related parties to
insurance need to pay more attention towards increasing the both awareness and literacy of
health insurance so that OOP could decrease. Launching of schemes is not enough but to
implement them in the right direction, tracking and assessing timely is very important for the
success of those schemes.
Recommendations and Conclusion
India, a big nation needs to put a lot of efforts for making financial inclusion successful.
Bnaking is primary step and inevitable step to the broader process of financial inclusion.
However government should also consider other sectors for enhancing financial inclusion. In
India, 21.9% of population live below the poverty line. It has the largest number of people
living below the international USD1.90 a-day poverty line (World Bank report Poverty and
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
Prosperity). With highest poverty ration alone banking sector cannot help in reducing
financial exclusion. All the other sectors are equally important.
In every phase of financial inclusion, much emphasis is laid on the availability of
banking and credit facilities at easy and affordable costs. Various schemes and models were
introduced for the same.
Healthcare sector plays are very important for the financial inclusion. Every person
regardless of his income has some kind of healthcare expenditure. Policymakers and other
government officials should also focus on this sector. The public health spending of India
among BRICS is very less and out-of-pocket expenditure for healthcare is highest. It
adversely effects on the per capita income and savings of people, their living standard and
also impacts GDP as a whole. To overcome and tackle this problem various insurance
schemes were introduced. These insurance schemes were launched by the government for
marginalised sections of society but it is very important to assess whether people are aware of
those schemes and benefits associated with them. We need to increase the insurance literacy
rate in these sections of society. Launching of schemes is not enough but to implement them
in the right direction, tracking and assessing timely is very important for the success of those
schemes.
India is counted among the countries with the lowest insurance literacy rate. Insurance can
play a vital role in enhancing financial inclusion. The literacy graph and the insurance holders
graph shows though the literacy rate is low, households without a life insurance have opted
for some other kinds of insurance (motor insurance with a high percentage in uninsured).
This depicts that there is a need to aware people about the health insurance and its
importance. Government should increase healthcare budget considering all the above facts.
There is a need to increase the healthcare spending as a percentage of GDP.
Some important points to consider are below:
1) Preparing an efficient healthcare budget with appropriate utilisation and management.
2) Choice in health care financing and fund allocation, avoiding "one size fits all" policy.
3) Establishment of audit mechanism and full proof financial monitoring.
4) Better Human Resource Management, better capacity building and training to staff.
5) The wider spread of health insurance products.
6) Improving resource allocation through cost-effectiveness.
FINANCIAL INCLUSION THROUGH HEALTH INSURANCE
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