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CHAPTER II    REVIEW OFLITERATURE 2.0 Philosophy of choosing a Career inInsurance With theliberalization, privatization and globalization of our economy, the Indianinsurance industry has taken rapid strides and has emerged as a viable careeroption for many of the working population. As a result, not only insuranceagents but also marketers and actuaries are in great demand in the insurancesector.

Insurance Companies deal in two main areas – Life insurance and Generalinsurance. With the liberalization and opening up of this field severalcompanies have come up in the field of Life insurance and general insurance.However, many mainstream businessadministration colleges and institutes do not see an influx of studentsprimarily joining them with an aim to pursue a career in the insurance sectoras by way of choice many current insurance professionals, primarily atmanagerial levels “grow” in the field by way of climbing the hierarchy. Asopposed to growing in the field and climbing management levels which takesimmense time, the advantage that a professional degree gives to an individual isthat he or she can easily jump the hierarchies of management after passing outfrom a reputed business school programme, and the advantage the company gets isthe choice of choosing the cream from a pool of candidates polished to theirrequirements for strategic roles, and developing the best out of the best candidates’according to their business requirement. According to a review by Duff McDonaldsin his 2012 book “The Firm: the story of McKinsey and its secret influence onAmerican Business” it denotes that McKinsey holds hiring from reputed IvyLeague schools as a key part of their core strategic investments because it is “easierto train younger minds rather than hire expensive experience.” On the other hand, in a study(Madhusudhan, 2015) surveys indicated that students are reluctant to pursue acareer in insurance as they find the field uninteresting. Such a decisionusually occurs because students are unaware of the underlying philosophy thatgoverns the insurance industry, the business of insurance, the products thatare developed, marketed and sold in the industry and the important roleinsurance plays in the economy by reducing out of pocket expenditure. The mainreasons why students from business schools lack an incentive to deeply study insuranceis the lack of marketing of the insurance industry as a viable field of study,which in turn leads to a reluctance to engage with giving the profession aserious thought.

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In India apart from the job roleas an ‘insurance agent’, many individuals remain blissfully unaware of theimmense scope in marketing, operations, product development and highermanagerial careers that can make a successful career in the insurance industry.As such there needs to be a directed strategy towards professional bodies andeducators to form concise and directed courses towards insurance. There doexist a varied number of insurance institutions in India which have identifiedthis gap and do churn out professionals in the field. However, the same cannotbe said purely of a course in Health Insurance. Jobs in insurance involve helpingpeople and businesses manage risk, to protect themselves from disaster andlosses and to anticipate potential risk problems.

Employment opportunities inthis area are professionally and financially rewarding. In this sector, therewill be demand for advisors, marketing specialists, customer servicerepresentatives, human resource professionals, etc. Also needed would beadvertising and sales promotion people for image building exercises.

 2.1 The need for a directed study towards Health Insurance Health Insurance is defined as the insuranceagainst the risk of suffering medical expenses among individuals. Bycalculating the overall risk of health expenditure among a specific group aninsurer develops a routine finance structure, such as monthly quarterly oryearly premium or payroll tax, to ensure that money is available to pay for thehealth care benefits specified in the insurance agreement. There are variousforms of health insurance in India which provides coverage to the one-fourth ofIndian population. Some of these insurance are mandatory or voluntary or it maybe community based. Mandatory health insurance are usually provided by theemployers for e.g. ESIS, CGHS, and ECHS.

Private health insurance are purchasedvoluntarily whereas community health insurance are sometimes mandatory orvoluntary to the specific group of the population. These all insurancecontributes towards the health system goal for providing financial riskprotection by reducing financial barrier to get the quality health care. Bypooling of fund, insurance offers the opportunity to distribute the costsacross various stakeholders.In India the private health insurance startedwith the establishment of General Insurance Corporation (GIC).

This wascommonly known as Mediclaim insurance policy. In the year 1999 as result ofliberalization privatization and globalization the Government of India allowedprivate health insurance company after the passage of Insurance Regulatory andDevelopment Authority (IRDA) Bill in the year 1999. During the first decade of the sector’s liberalization,there has been a consistent rise in insurance penetration from 2.71% in 2001 to5.20% in 2009. However, since then, the level of penetration has been volatileand remained below the peak (Assocham, 2017).There are three major weaknesses in the Indianhealthcare system (Peters,2003) such as weaknesses in healthcare organizations,financing for healthcare, and provision of health care services. Out of allthese issues health financing has remained the most dominant issue.

According to WHOGlobal Health Expenditure Database (2014) estimates that private health expenditureas a percentage of GDP is almost at 3.3 percent for India with a world averageof 3.932 per cent of GDP. However in contrast, public health expenditure inIndia as a percentage of its GDP is only at 1.4 per cent as compared to theworld average of 5.9 percent. The private insurance industry finds a largefooting in the Indian market because of the gap created by a lack of publichealthcare funding and very few social security schemes which are not enough toprovide extensive coverage.  2.

2 Growing popularity of Health Insurance Business As regards to the out of pocketexpenditure as a percentage of GDP, a large 62.4 percent of the populationspends money out of their own pockets and are hence not covered by anyinsurance scheme whether private or public as given by the same WHO database.The out of pocket expenditure world average is at only 18 percent, and ascompared to India shows that the Indian insurance market has a lot of scope interms of growth and market expansion in both the private and government sector.Low insurance penetration in India is evidenced by this fact, and health insurance inIndia has gained immense popularity as a major tool for health care financing. Thetotal insurance penetrationas a whole in 2015 in India was 3.4%, against the world average of 6.2%.According to the Assocham report(2017), “The number of lives covered underhealth Insurance policies during 2015-16 was 36 crore which is approximately30% of India’s total population.

The number has seen an increase everysubsequent year as 28.80 crore people had the policy in the previous fiscal,”it pointed out.Awareness of insurance as a means of providing acover from out of pocket expenditure especially for hospitalizations is a primaryreason why health insurance is gaining much more popularity. Individuals value their lives and economicsafety. However, health behaviour practiced by many suggests that manyindividuals do not make the association between financial security and healthsecurity.

This behavioural aspect is a major challenge area for insuranceproviders in terms of designing and selling insurance premiums and policiesrespectively, and to address this challenge is a primary reason why individualsare employed as underwriters, marketers or analysts in the insurance sector. Yetanother reason for the growing popularity of insurance policies is the benefitof tax exemption that is provided to family oriented and individual plans.Majority of the private insurers also provide lucrative returns and are nowbeing availed by a section of the Indian society with greater disposableearnings. There is an aspect of psychological comfort attached to theinsurance policies as well – whenever an insurance is availed the policyholdercan be more or less assured of a safe future for that particular part of his orher life.  2.3 Key Features of Health Insurance coverage in IndiaThere exists vast difference inhealth insurance coverage structure in India and most of the developed nations.A comparison between health insurance coverage in India and that of the UnitedStates of America highlights the following differencesMandatory/ OptionalIn India it is not mandatory toget health coverage, as opposed to healthcare cover in the US where it is coveredby the employer.

Neither is it compulsory for family members to be covered inIndia. It iscompulsory for every individual in the United States of America to be coveredunder a health insurance plan and every employer must ensure that each of hisemployees is covered under health insurance during the period of employment.Health Cover Health covers in India usually only cover hospitalizationand thirty to sixty days pre and post-hospitalization visits to the doctor.This is as opposed to the coverage system in the USA which includes every visitto the doctor, be it for something as minute as a viral fever.Employee Health BenefitsIn India, employers have no liability to provide healthinsurance cover to their employees. It is a purely voluntary factor and noemployer provides health insurance to an employee upon his/her resignation.

Astructurally unemployed person, therefore, will have health cover only if hehas purchased a policy privately or when he finds another job where theemployer chooses to provide health cover to his employees. As opposed to the former,employers in the United States of America must provide health insurance coverto their employees, not only during the period of employment, but also in thecase of the employee resignation until he finds another job.Premium Rates Premium rates of health insurance are comparatively lowersince the health insurance sector has not permeated through much of thepopulation and higher rates would further discourage people from gettingthemselves insured under the voluntary insurance model followed here. In theUnited States of America premium rates of health insurance are higher as morepeople are covered under health insurance and the standard of living is muchbetter.State-Wise DifferentiationIndia, not being a federationlike the USA, has the same set of policies for the entire country as a whole,with no state-wise differentiation or customization.

However, USAfollows state-wise differentiation in the case of health insurance policies,that is, each state has its unique tailor-made set of health insurance policiesthat are most suited to that state.Insurance, like many things,may be demographical but is most certainly not a geographically regionalrequirement. Accidents and death will occur, no matter what part of the city,country or world one lives in. As a result, insurance needs to be prevalent inall countries of the world. Indian insurance may be almost two centuries oldnow, with its earliest origins in 1818, but it still has a long way to go to beas potent and as pervasive as insurance in the West.   

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