Only 27 per cent of Indians have health insurance coverage, a joint report by FICCI and KPMG revealed on Monday.
The report, titled "Health savings account in India", revealed that the healthcare sector in India is largely under-penetrated with government expenditure constituting approximately 1.4 per cent of the country's GDP.
On the other hand, private sector expenditure constitutes 70 per cent of the total healthcare expenditure out of which 62 per cent is out of pocket while only eight per cent is covered through pre-financed instruments, as per World Bank Data.
This indicates a significant gap in coverage offered by current products and the need for a comprehensive ecosystem of financed healthcare.
"Healthcare costs today are going up by the day due to lifestyle diseases in particular and the only way the gap between rising healthcare costs and affordability can be bridged is if the insurance sector develops a sustainable and viable mechanism," Antony Jacob, Co-Chair at FICCI Health Insurance Committee, said in a statement on Monday.
"Today with out of pocket expenses accounting for nearly twice as much as institutional expenses, there exists a real need for an all-inclusive solution towards healthcare in the Indian market."
Currently, the health insurance industry caters largely to institutional treatment leading to considerable opportunities in targeting outpatient treatment, with medical inflation at 15 per cent, in areas such as consultation fees, diagnostics and medicine expenses.
There is an urgent need for a centralised health savings scheme managed by a government-nominated body or privately managed by insurers with centralised fund management, the report suggested.
"This will ensure that more and more people have funds for accessing healthcare services, thereby going a long way in realising India's goal of providing healthcare to all," noted Shashwat Sharma, Partner and Head (Insurance) at KPMG.