CASE STUDY

DEBRIEF
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Round of Stratos 2019. Stratos has grown
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We welcome you into the The Case Study Round.
This is a crucial next step for your team as it will
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stage of the competition. We wish you the best
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Warm regards,
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1
 PROBLEM
STATEMENT:
Acquire 10 million customers
through a simple digital product
and channel strategy.

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 Background:
Industry Overview:
• Driven by low penetration and increasing awareness amongst the
masses, the health insurance segment has seen consistent growth
in recent years. Health insurance premiums (FY2018-19) now
constitute ~30% of total non-life insurance premiums as against
~22% in FY2011-12. The health insurance industry registered
premiums of `50,076 Crore in FY2019, which translate to 18%
growth year on year.

• Standalone Health Insurers (“SAHI”) grew at 37% with a gain in

market share of 3.1% (FY2019 Market Share 22.7% versus Previous
Year 19.6%).

Industry Performance and Growth (` Crores)

Key metrics FY2017 FY2018 FY2019

Total Gross Written Premium (GWP) 34,602 42,300 50,076

GWP – Group & Government 19,200 22,085 26,417

GWP – Retail 15,402 20,215 23,659

Overall Y-o-Y Growth 22% 22% 18%

Source: IRDA / GIC Segment report

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 Industry structure:
Currently, there are 32 companies operating in India’s health insurance
industry and these can be broadly divided into three categories (1)
Public Sector Undertakings (PSU) General Insurers with 49% market
share, (2) Private General Insurers with 28% market share and (3)
Standalone Health Insurance Companies, which have the balance
23% market share.

Industry Market Size and Market Share of Category of Insurers

GWP `Crores YoY Growth 3 Year CAGR

Industry Total 42,317 50,073 18% 22%

PSU Insurers 55% 49% 5% 14%

Private Multiline 25% 28% 34% 28%

SAHI 20% 23% 37% 40%

FY2018 FY2019
Source: IRDA / GIC Segment report

Health insurance has three broad customer segments:

1) Group segment (B2B) for corporates with ~49% of the market
dominated by PSU insurers E.g. Employer buying insurance for
their employees
2) Retail segment with ~41% market, which has seen relatively higher
growth due to increased penetration in Tier-II and Tier-III cities E.g.
Individuals & Families
3) Government segment, which forms ~8% of the industry. E.g.
Ayushman Bharat.

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 Industry outlook and opportunity
Healthcare service and health insurance in India are evolving driven
by demand side and supply side factors. The growth prognosis of the
health insurance industry remains robust against the backdrop of an
increasing population, especially the middle class, as well as
increasing incidences of lifestyle diseases.
The following opportunities remain key demand drivers:
• Out-of-pocket expenditures (medical expenses which are not
insured and paid from an individual’s pocket) remain high, coupled
with increasing health expenditure:
• The cost of medical expenses is expected to rise at 10.6% in
2019 (Source: 2019 Global Medical Trends Survey Report by
Willis Tower Watson)
• ~70% of healthcare spending is out of pocket today versus just
~8% in South Africa and 11% in the US
• Expanding middle class, with middle-class households
predicted to increase from 70 Million in 2016 to 110 Million by
2025
• 35% of the total population is covered under government & social
schemes which do not have comprehensive coverage up to private
tertiary care hospitals
• Significant opportunities exist to increase retail customer
penetration as currently only ~3% of the population is covered
under comprehensive retail health insurance schemes (excluding
Government and Group policies)
• Evolving models of Insurers - Focus on Tier-III cities, new
technologies and online distribution

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 Company Overview
Aditya Birla Health Insurance Co. Limited (ABHICL), a subsidiary of
Aditya Birla Capital Ltd (ABCL), is a joint venture between Aditya Birla
Capital and MMI Holdings of South Africa. ABHICL was incorporated
in 2015; Aditya Birla Capital Limited (ABCL) and MMI Strategic
Investments (Pty) Ltd hold 51% and 49% of the joint venture
respectively. ABHICL commenced its operations in October 2016 and
is engaged in the business of health insurance. ABHICL’s current
product portfolio includes unique offerings such as chronic care and
incentivized wellness.

ABHICL serves as an enabler and influencer of health and healthcare

choices that customers make, in addition to being a payer of
healthcare expenses. Thus, ABHICL acts like a much-needed catalyst
to grow the prevalent health insurance landscape in India through
product innovation and a broader choice of consumer relevant
products. ABHICL has invested considerable time and effort to
understand existing correlations between good health and individual
health choices. ABHICL’s product philosophy aims to combine an
understanding of this science with an assessment of the unaddressed
needs of large customer segments.

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 Company Performance FY 2018-19
The strength of the business model was validated by the ABHICL’s
performance in FY2019. It was also characterized by reinforcing
capacities across products, people and distribution domains. ABHICL
delivered a strong performance across financial and non-financial
parameters during its second full year of operations.

ABHICL registered a Gross Written Premium of `497 crore of

translating into a year-on-year growth of 104% largely on the back of
a retail business franchisee, which itself registered a growth of 261%,
which as compared to the competition is one of the fastest growth
phases witnessed till date in the industry. This demonstrated its
competitive strength in the areas of customer value proposition,
robust multi-channel distribution and focus on digital delivery.

During FY2019, ABHICL added 1.3 million lives, to take the total to
2.3 million insured lives. It has carefully designed an integrated
phygital model (Physical + Digital) with relevant technology and digital
partnerships that enables scale and improves customer experience.
The accelerated growth has been accompanied by strong focus on
profitability of the book being created. This has been demonstrated
through multiple dimensions of broad-based product mix, diversified
geographical mix, declining combined ratios and incurred claims ratio
and balanced channel mix.

ABHICL’s differentiated business model has pushed it to focus

significantly on the ‘health’ proposition in health insurance with 40%
of its customers initiating their health journey with the Company
during the year. In terms of its service delivery model, the Company
has put in place a robust platform for supporting end-to-end
customer journeys from sales to servicing to wellness.

ABHICL has empanelled 5,800+ hospitals to enable cashless services

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 across 800+ cities pan India. In the first two years of operations, it
stabilised its operating model for driving the CVP (Customer Value
Proposition) i.e. incentivised wellness and chronic care management.

Its wellness proposition needs to be further scaled through

continuous engagement with customers, distributors and healthcare
ecosystem.

Year on Year Growth Highlights for ABHICL

Total Premium Retail Premium Retail Mix as %

(` Crores) (` Crores) of Total GWP (%)

497 65%
321
243
21%
54 83
3 6%

FY2017 FY2018 FY2019 FY2017 FY2018 FY2019 FY2017 FY2018 FY2019

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 Multi-Channel Distribution Model
ABHICL has adopted a multi-channel distribution model across
agency, broking, bancassurance, digital and direct marketing chan-
nels. Multi-distribution strategy has helped to gain access to new ge-
ographies, especially in Tier-III cities and untapped customer seg-
ments to deliver its unique customer proposition that is the foundation
of the business model. As a result, ABHICL has expanded its footprint
from 150+ locations in FY2018 to 800+ locations in FY2019.

• The Agency channel consists of 18,400+ advisors with a spread

across 41 locations through 59 branches
• In Bancassurance, ABHICL has one of the largest Banca
distribution capacities in the industry with tie-ups with 10 bank
partners
• ABHICL has a strong partnership with corporate agents and
brokers and it will continue to look at new digital tie-ups in the
third-party distribution segment like Paytm, Paynearby, etc. with a
view of creating long-term strategic partnerships
• In group segment, ABHICL has a diversified group portfolio through
SME and creditor businesses

Key Distribution Indicators – Segment, Channel and Geography

Retail Segment Channel % of GWP Geography % GWP

% of GWP from Banca for Non-metro

65% 53% 35%

27%
37% 28%
8%
6% 0%

FY2017 FY2018 FY2019 FY2017 FY2018 FY2019 FY2017 FY2018 FY2019

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 To summarise, ABHICL’s focus for the coming year would be to
optimally utilise the distribution capabilities created over the last two
years and achieve maximum productivity from the available capacity.
Given the strength of its innovative customer value proposition and
the differentiated service model, including wellness and chronic care
management, it is confident that it will be making further in-roads in
its distribution channels in the years ahead.

Product Portfolio
Aditya Birla Health Insurance has entered the health insurance market
with an aim to expand the category to wider customer segments,
beyond the ones that health insurance companies traditionally have
marketed to. And through a full range of offerings by providing “Health
Insurance for All”.

This includes -
• A Comprehensive Incentivized Wellness Program that will attract
the young and health conscious and will motivate, guide and
reward them to stay healthy
• A Chronic Care Management Program to cater to the unmet needs
of a growing Indian population of those suffering from chronic
lifestyle conditions like Diabetes, Asthama, High Cholesterol and
Hypertension from Day 1
By focusing on health in health insurance, our business model has
been built around the philosophy of “health first” – to promote healthy
living. This is against the current focus on insurance only.

ABHICL has extended its product portfolio catering to all classes of

prospective customer segments.

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 The product portfolio is broadly categorised into two segments:
1. Retail products: Where an end user directly interacts with
salesperson from insurer (physical/digital) and decides to buy
insurance
2. Group product: Where there is an intermediary between insurer and
end – customer, who either buys for all users in the group (like HR
buying for all employees) or gives an option to buy (like Ola offering
an option to its customer for travel insurance).
Group insurance products are tailor-made solutions, which can be
customized to cover bouquet of insurance benefits at a suitable
premium for the right kind of segment. The solutions can be
customized for event based, short term and bite-size products.

Consumer Segment – Income Product Mapping - Health

Indemnity

B2B2C (Group Product

Very HNI offered as retail)
Attribute –
Active Health Bite size offering
Seeks returns
-Accident hospitalization
-Critical iliness
High net worth (HNI)
Attribute – Invests and seeks Fixed Benefit Event Specific offerings
returns PA -Coverage for Monsoons
Critical illiness -Coverage for Movie
Affluent Cancer
Attribute – Value seeker Hospital Cash Short Term product
Active
Assure -Coverage for 1
Mass affluent month/attachments
Attribute – Price sensitive and value seeker
Limited coverage
Mass -Coverage for specific
Attribute – Price sensitive diseases such as Dengue

Rural Micro Insurance

Attribute – Need based

Choice is also dependent upon geography. Customer mindset, Age, Critical illness/ Cancer, Accident, Hosp cash can
Family status, medical history, risk appetite and lifestyle be pitched stand alone to all segments or can be
up-sold with both Active Assure and Active Health

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 Multi-Channel Distribution Model

Active Health
The Prime
Fixed Benefit
PA
Critical illiness
Cancer
Hospital Cash

The Benefit seeker

Active
Assure

Traditionalist
(Price sensitive)

Choice is also dependent upon geography. Customer mindset, Age, Family status, medical history, risk appetite and lifestyle

Current digital offerings in health insurance industry

Traditionally insurance was sold by agents & brokers. However, in
current digitized era, it is easily available through online comparison
sites (aggregators) and insurers websites to retail customers. These
products come with a fixed offering and are subject to underwriting
depending on customer’s profile.

On the other hand, the insurance industry has also gone beyond the
boundaries of traditional channels and has created product and
service innovations. However; this is just the tip of the iceberg. There
are many such untapped avenues waiting to be explored. Appended
are a few of such innovations;

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 a) Contextually attached offering
Digital platforms are monetizing insurance opportunities by
providing top-ups during customer purchases. Selling insurance
policies through digital/e-commerce platforms benefit both
consumers and companies alike as it offers real-time connect and
brings more transparency. These digital platforms are relying on
traditional insurance providers to de-risk themselves and leverage
existing insurance frameworks. Insurance is being sold as an
attachment to the main product.
Current market innovation examples on contextual attachment:
Popular players: - Paytm, Mobikwik, Makemytrip, Ola, IRCTC,
Acko etc.
• Dengue / Malaria Insurance of `10,000 @ `49/-
• Trek Insurance – Specific cover for injuries/hospitalisation during treks
• Flight / Train/ Bus Travel insurance – For the duration of the travel
• Ola’s trip insurance @ `1
• Fire & Burns Protect (Burns & Recovery) Insurance @ `100
• Selling smartphone insurance with the purchase of mobile
phones on Amazon
• Partnered with Ola to provide in-trip insurance with a starting
premium of `2

b) Marketplace
Online marketplace is a primary type of multichannel e-commerce
where many third parties provide information on goods and
services. The website operator processes the business
transactions making the production process more efficient. In the
world of health insurance, a marketplace is a service which helps
people to shop for affordable health insurance. The products
offered can be bite-size (Premium less than `1,000) or
comprehensive health insurance plans (i.e. complete
hospitalization care plan/ mediclaim).

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 Current market innovation examples:
In its push towards becoming full-fledged financial services firm,
mobile wallet players are increasingly offering digital insurances.
Mobikwik for instance started providing accidental insurance in
2018 with plan to add general insurance in partnership with
insurance companies. Similarly, Paytm is also offering auto & health
insurance products from multiple providers on its platform.
Another new trend in the space is bite size insurance offerings
where companies are offering event specific, disease specific,
short term covers, primarily targeted towards millennials and
working professionals e.g. Max Bupa has tied up with MobiKwik to
offer hospicash (hospital allowance during admission up to `500
per day at a mere premium of `135 per annum)

c) Phygital Channel-
Phygital brings together the best of physical and digital worlds to
create a much more complete and satisfying customer experience.
It takes the best components from the digital experience like
immediacy, immersion, and speed and the chance to interact with
people, the product, and more that you get from a physical
experience.
Current market innovation examples:
Max Bupa Health Insurance in collaboration with Karur Vysya Bank
offers ‘Max Bupa AnyTimeHealth’ (ATH) through which bank
customers can buy health insurance policies from an ATM like
machine. These machines will conduct non-intrusive medical tests
and issue health policies for up to `10 lakh without manual
intervention. It is claimed that customers can buy a policy within 3
minutes through this machine.

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 Case Study Deliverables
Goals to achieve -
• Simple, easy-to-understand products to acquire next 10M
customers digitally
• Enhance overall value of original product along with which
insurance is being attached making it a complete package (in case
of contextual attachments)
• Completely paperless satisfactory experience from on-boarding to
policy maturity or claims
• Sustainable, profitable product & pricing
• Need to be a product solution which is customized for Indian
consumers only

Ground Rules -
• The designed insurance product should fall under the categories of
• Accident
• Healthcare
• Travel: including products related to health & inconvenience (lost
baggage, delayed trips, cancelled flights)
• The attachment upsell or cross-sell should be digestible to the
category along with which the insurance solution is being sold.

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 Glossary
• GWP – Gross Written Premium is the total premium written before
deductions for reinsurance and ceding commissions and net of
service tax

• Combined Ratio - The combined ratio is a measure of profitability

used by an insurance company to gauge how well it is performing
in its daily operations and is calculated by dividing the sum of
incurred losses and expenses by the total earned premium. Lower
the ratio, higher the profitability of an insurance company.
Combined Ration = Loss Ratio + Commission Ratio + Expense Ratio.
Loss ratio = Net incurred claims + TPA fees / net earned premium
Commission ratio= Total commission paid/NWP
Expense ratio=Total Expense /NWP

• Incurred Claims Ratio – Total amount booked in the system for

claims paid + claims outstanding at the end of a given period.

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 Good luck to you as
you move toward
the next Phase of
Stratos 2019

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