DealStreetAsia’s recently concluded webinar ‘Building health solutions for a post-pandemic India’ was conducted just a few months after the second wave of COVID-19 exposed and amplified the cracks in the Indian healthcare system.
Speaking of the building blocks to create a holistic healthcare model, the panellists zeroed in on greater clarity from regulators, the recently announced Unified Health Interface (UHI) and a more expansive healthcare infrastructure, augmented by technology.
Interest in healthtech and insurtech-driven solutions had picked up post the pandemic – especially significant since it had hitherto not been too sharp a focus area even amid a larger startup boom in India. Among the reasons for this was an uncertain regulatory environment and the nature of healthtech, which, beyond a point, had to rely on a physical infrastructure of doctors and clinics.
Ben Mathias, managing partner, Vertex Ventures Southeast Asia & India said, “Healthcare can never be a tech-only business. There is a very large offline component which presents a scalability challenge that cannot be wished away.” In the case of insurance, he added, “Capital and entrepreneurs are available for health insurance to scale faster, but regulatory challenges need to be addressed.”
The recently announced UHI – a nationwide network that would connect doctors, patients and hospitals all over India, offering one view of patients — was starting to inspire confidence and optimism. Abhishek Mohan, principal at Sequoia India said, “The UHI can be quite revolutionary. It will be an open network with everyone on the same platform: be it patient, provider or payer.” He believed it had the potential to be as disruptive as the Unified Payments Interface (UPI) which unleashed a fintech boom across India. He said, “It might not be as smooth or fast as UPI. But we are bullish about it getting rolled out. Once that happens, founders have to figure out how they can benefit. That’s when investors come in. We are a while away, but it’s exciting.”
Aniruddha Sen, co-founder, Kenko Health whose company is at the centre of providing holistic solutions that go beyond health insurance, believed the UHI could play a role in addressing the pain points of data integration and flow. He said, “In the US, most of the systems were put in place during The Great Depression and evolved over 60 to 70 years. The timeline will get massively crunched to maybe five or six years in India as we tend to leapfrog tech generations.” He said that the UHI would make data accessible, reduce fraud and once it reached a certain scale, help companies in the healthtech and insurtech space price their policies efficiently, making healthcare more affordable in the process.
Ruchira Shukla, regional lead for South Asia, disruptive technologies and global sector lead for healthtech at the World Bank’s International Finance Corporation (IFC), saw technology not so much as a solution, but as an enabler. Addressing a question on the vast lacuna in medical talent in the region, she said, “Be it physicians or nurses, technology will play a role in being a training platform. A lot of medical education still continues to be offline. You’ve seen tech platforms solve for education in K12 and beyond. That should start happening in professional degrees and vocational training. Whether it’s training as a radiology technician or a phlebotomist or doctor, or even the more advanced master’s programmes, they can be delivered through tech.”
The webinar was sponsored by Kenko Health and moderated by DealStreetAsia editor in chief Joji Philip.
Sign up to receive the webinar recording and read a transcript below, edited for brevity and clarity:
How much has the pandemic added fuel to the fire when it comes to deal volumes and investments in the healthtech and insurtech space?
Abhishek Mohan (AM): With COVID, there was an acceleration of digital adoption. Most companies saw tailwinds during the pandemic. Even as the pandemic is subsiding, that momentum has sustained. People are sticking to ‘digital first’ behaviour.
Most companies have benefited specifically in health and insurance. Online consultations shot up significantly. On the insurance side, there has been a 40% YOY growth on premium collected. It has trickled down to startups and tech companies in the space.
In a way, it’s all connected. Existing companies securing more capital, leads to new founders coming into the space with innovative products, and that leads to increased deal activity. Over the last 12 months, we have seen the largest number of companies emerging in health and insurtech.
Why haven’t healthtech or insurtech startups scaled in line with the boom that we have seen in other sectors in India and Southeast Asia?
Ben Mathias (BM): Healthcare can never be a tech only business. There is a very large offline component – going to a hospital and meeting a doctor in person. It’s a scalability challenge that cannot be wished away. It got even more severe during the lockdown. Healthcare startups looking to build offline centres had to slow down.
A lot of offline hospitals and healthcare chains are now working with startups to tech enable themselves to be more accessible. They provide healthcare consultations even if you’re not in the vicinity. But you still need the hospital, clinic, and doctor. Those constraints limit the scalability and pace of expansion.
Insurance is completely different. Capital and entrepreneurs are available for health insurance to scale faster, but regulatory challenges need to be addressed.
What’s the state of play in India when it comes to affordable and accessible health care? What has changed due to the pandemic?
Aniruddha Sen (AS): If you compare the cost of healthcare to other countries, on a per capita basis, or even on a whole population basis, it is less expensive for multiple reasons.
Some elements are subsidised by the Government of India, due to our socialist past. But accessibility remains a problem. The number of healthcare facilities are far less than what is required.
The pandemic has only been around 12 or 13 months and so has not affected this to any sizeable proportion. For it to completely change the fundamental makeup of how much healthcare costs and its availability, is difficult to do within this time frame.
But what it has done is heighten the sensitivity of people towards structured financing for healthcare. It has also amplified the cracks in our system. Like beds being unavailable or all of us suddenly running out of medical oxygen and costs going through the roof.
Whenever something like this gets amplified at a nationwide level, it brings the problem to the fore of policymakers. You should expect to see many shifts in policy, followed by infrastructural changes over the next two to three years.
Vertex has shied away from deals in India over the last couple of years. Are the regulatory challenges such a big concern?
BM: It’s not that we’ve not wanted to do insurtech investments in India. I’ll be quite blunt about this: we’ve had startups that were funded by very strong entrepreneurs, with years of experience. There’s been capital lined up, but the regulator just doesn’t make a decision. It’s also fairly opaque in terms of why the decision was not made. But if you cannot get a licence, you cannot operate.
The need of the day in India is innovative companies with new healthcare insurance products. For that, they need a licence and for it to be issued, the regulator ought to be more proactive and open minded about new models. I was very happy to hear the prediction that a lot of policy will be introduced in the next couple of years, because that is greatly needed in India right now.
Two back-to-back rules issued by the Reserve Bank of India on recurring payments have left all businesses unprepared. Some reports say that 70% of all standing instructions for recurring payments have failed in October and may continue to fail. How much has this hurt Kenko Health?
AS: It has hurt us just as much as it has other people. Thankfully, we haven’t yet reached the scale where it becomes mission critical. The policy was announced in March and gave us some time to prepare.
Having said that, it takes a while to build infrastructure to tackle a problem like this. There are two facets: collection and communication. Before a mandate comes up for a particular month, you need to remind the user that a payment is due. But the RBI guidelines put the onus of communication on banks and financial institutions. They are totally unprepared and lack the infrastructure required to do this, in such a short timeframe.
As a result, people like us had to build out our own communication stack. We still depend on payment services companies for collecting money. Many banks haven’t yet formulated a uniform system in order to collect payments. There are two private stacks that are currently operating. We are working with card payment services companies.
Another issue is that perhaps by the end of this year, merchants will not be allowed to store card details. That will have a massive secondary impact. For every single transaction, a customer will have to input a card number which was otherwise saved by the merchant. People like Amazon, with a large volume of electronic transactions, had built solutions around simplifying friction at the point of payment.
All that has to be re-thought. Measures like this comes as a shock to the system and it takes six-to-eight months to recover, followed by another eight-to-ten-months in recovery mode. You are looking at maybe a little over a year before things get to normalcy.
From an investor’s perspective how do you view India’s plans to build the Unified Health Interface (UHI) — a digital backbone for healthcare?
AM: The UHI can be quite revolutionary. It will be an open network with everyone on the same platform: be it patient, provider or payer.
UHI has the potential to be as big and disruptive as UPI which digitised payments and created a whole ecosystem of companies.
Of course, health has a huge offline element, which payments didn’t have to go through. It might not be as smooth or fast as UPI. But we are bullish about it getting rolled out. Once that happens, founders have to figure out how they can benefit. That’s when investors come. We are a while away, but it’s exciting.
Can UHI address the pain point of data integration and flow across various players in the ecosystem?
AS: In the US, most of these systems were put in place during The Great Depression and evolved over 60 to 70 years. In India, most of our systems and processes were borrowed from or modelled on the US, despite the differences in our population sets. The timeline will however get massively crunched to maybe five or six years in India, as we tend to leapfrog tech generations.
The health stack does three or four things. It’s a central repository of people’s health data which comes from multiple sources: caregivers, health services, hospitals, doctors, clinics, etc. There is also data available from insurance and other financial institutions and populated by alternative firms like e-pharmacies. It makes parts of that data accessible to those who need it.
The only challenge is that data becomes significant only when it reaches a certain scale. For an insurance player to be able to accurately price a particular product they need morbidity at a population level. Currently, we use morbidity tables. But if this becomes available over the next four to six years, financial products in healthcare will become more affordable. Then pricing isn’t dependent on some of the assumption factors that we typically consider.
Purely from a pricing point of view, there’s a lot of fraud that happens in Indian healthcare. Our estimate is that it could be anywhere between 12% to 15% of total claims – a large amount. To prevent that leakage, we need policies, rules and regulations. Our hope is that as the repository comes out, there will be some guidelines in place just like with Aadhaar and UPI.
If both things happen in tandem and people participate wholeheartedly and contribute with data, then in four to five years, we could see this getting to the same scale as perhaps the US in 60 or 70 years.
What’s your big picture view on whether India has an opportunity to leapfrog on health, just like it did in telecom and in banking?
Ruchira Shukla (RS): COVID-19 brought an immediacy and urgency to healthcare: access, affordability and quality all need to be solved for. All stakeholders — investors, entrepreneurs, regulators, academic and industry bodies — have come together to make it happen.
We seeing that in the nature of solutions — teleconsultation is very simple when you think about it, but it became front and centre only during COVID-19. Before that, people considered it as a last resort, or for a second opinion.
But when you found patients struggling to get into a hospital or not feeling confident about walking into a pharmacy, it led to teleconsultations and pharmacy platforms getting a lot more volume. It gave a big boost to tech interventions in healthcare.
Some reports say India has a shortage of about 7 million healthcare professionals. What can be done to address this gap?
RS: Tech alone will not be the solution, but it will be a huge enabler. To your specific point about solving for medical talent, be it physicians or nurses, it will play a role in being a training platform. A lot of medical education still continues to be offline.
You’ve seen tech platforms solve for education in K12 and beyond. That should start happening in professional degrees, vocational training and the like. Whether it’s training as a radiology technician or a phlebotomist or doctor, or even the more advanced master’s programmes, they can be delivered through tech.
It also allows for more hands-on training. We are looking at a platform that has that uses AR-VR technology for digital scrub-ins into an operating room. Think of using VR to train surgeons and the supporting staff in an operating theatre. That’s the kind of power that technology will bring to bear. It does not replace the doctor but ends up augmenting capacity, helping them train better and faster.
Despite the regulatory challenges, how do you see the ecosystem in India? Are startups trying to push the limits on product innovation?
BM: We’ve seen companies trying to address this problem in different ways. One way is what Kenko Health is doing: innovative health insurance offerings, and bite-sized premiums.
We’ve seen startups create integration platforms to link hospitals with insurance providers and patients. Once the healthcare stack comes up, it will accelerate this trend and make the process of claims management seamless.
There are companies that are trying to build IoT devices. The fourth category is what Ruchira alluded to: education. Startups trying to use technology to accelerate education, not just for MBBS, but also for nurses and paramedics.
We have seen startups build technology layers to make hospitals more customer friendly. Companies like Ayu Health, which we are invested in, have taken the second-tier hospitals, created a network and put that technology layer on top of them. That makes them more accessible.
Some reports predict that India’s gig economy could triple over the next three years to about 24 million jobs. What is the potential for virtual first health plans for this segment?
RS: There have to be path-breaking solutions — different from how health insurance for employees has been addressed. One option is group health insurance which will have them visit a virtual clinic before they go to a physical facility.
Both employers and employees would be open to that, especially since gig workers sometimes don’t have a specific location for work. A health clinic within a factory is occasionally the answer. This small centre becomes a triaging location, and a person shifts to another facility for further attention if needed.
We are seeing platforms for gig economy workers, where it’s not just about finding a job, but continued training, payroll management – a bouquet of services with health insurance as a key component.
We see many deals in terms of startups trying to build innovative solutions for the gig economy sector. How big is the opportunity and what’s the deal flow like?
AM: The gig economy is a formalisation of the labour force. They should have access to services which any white-collar employee is entitled to, starting with healthcare and insurance. Many companies are backing that trend like Zomato which has thousands of gig workers or Apna, which works with the blue-collar labour force, helping them find jobs.
Companies are trying to offer gig economy workers additional products and services. For example, Plum is not going after the gig economy but the SME population, which is somewhat similar across Southeast Asia. The opportunity is massive.
A report I was reading said that up to 2019 or 2020, 60% of healthcare expenses used to happen out-of-pocket in India. I assume the number hasn’t changed too much. The world average is at 20%. All of these trends will help us get to that world average.
RS: Traditionally companies have not cared enough about contract workers as much as they have about office staff. That shift is happening with a lot of platforms requiring large number of gig economy workers. Companies know what the price of attrition can be. And giving a good quality health plan creates loyalty which goes a long way in enhancing productivity.
Last year, India passed Social Security 2020 to formalise the unorganised or gig sectors – but it is yet to implemented. How much do you think the uncertainty around the code will hurt not just investors and startups, but gig economy workers?
BM: This is an issue that hasn’t been resolved anywhere. It’s a big debate in the US where the California government is trying to decide whether Uber drivers are full time employees or contractors. The fundamental business model of gig companies is that they are contractors. They have a choice to work whenever they want to, and not come in full time.
If the company had to provide them benefits, the cost of the gig employee would destroy the business model. And bear in mind, no gig economy company in India, at least not that I’m aware of, is running at a profit. They’re still drawing on investors’ money. The reason this code has not been implemented yet is that you don’t want to kill the goose that lays the golden eggs! If you start putting too many costs on the companies, these gig workers may not have jobs in the first place.
Even globally, there are not many companies that are trying to do full-fledged healthtech services along with insurance. Do you think this integration is particularly suited for emerging markets like India?
AS: This integration is suitable for any market emerging or otherwise. Perhaps what India needs is a reasonably full-fledged coverage for an overwhelming majority.
All other countries follow different models. Maybe the only places where this system works in great harmony and people are really happy is the Scandinavian countries where population pressures are not that much, tax rates are high and the quality of healthcare is out of this world.
The government in India has a million other things to do. The pandemic didn’t just throw up problems in healthcare. To expect a government-backed solution for every single thing, is not going to happen. We certainly need an integration of tech with financing.
Our opinion is that those financing systems — micro insurance and sachetised products — can come later as a top-up or in certain niches. But you need to work on something that is far more universal first, so a large percentage of the population has what we call ‘catastrophic cover’. To deliver this, you will certainly need tech.
Telemedicine is one part of it. About half of all out-of-hospital expenses are on medicines alone. To store medicines and deliver them to the last mile is a tremendous task. It can’t be done by two or three e-pharma companies alone. If you ask me, this sector needs participation from at least 30 to 40 more companies operating at scale, both insurance-based as well as non-insurance based.
For startups like you that are building such solutions, apart from tech what are the challenges? Is it lack of adequate investor interest, regulatory framework or reluctance of the users to pay?
AS: Perhaps the biggest of all would be infrastructure, in terms of data availability, especially for people who are financing a transaction. People who create insurance products are very similar to those who create lending products. Before you give someone money, you need to know a lot about them.
The second part of the infrastructural challenge is out-of-hospital expenses in India are about $300 billion. God knows how many people go untreated, and therefore that number doesn’t even get captured.
Mental health receives very little attention in most emerging markets. There’s also very little focus on health tech for women. Do you see this as an opportunity for startups?
RS: I’ll start with the latter because we spent a good part of this year on healthtech for women. IFC ran the Global Women’s Healthtech Awards in partnership with the CES conference. We invited applications not just from startups but companies across the spectrum who provide a solution for women’s healthcare in emerging markets.
We got a huge amount of interest, despite COVID-19 and are currently shortlisting entries. The winners will be announced at CES in January in Las Vegas.
We did that primarily because this sector has been ignored. People think of healthcare as one big space. But within healthcare, women tend to be at a disadvantage when we talk about access, affordability, or quality of care. Their needs are often unique but the solutions presented are quite generic. I’m given to understand that for most drugs, clinical trials are largely done on male populations. But women’s bodies may react differently. In breast cancer screening we’re still using the age-old modality of mammograms. Can there be smarter solutions? We are exposed through our investment in pi Ventures to Niramai that uses an AI layer on thermo analytics for more accurate breast cancer screening.
Moving on to mental health, I see more startups in the space pitch to us. A lot of them are bot-first: a virtual solution where, based on the responses, the app connects a user to an offline psychotherapist or counsellor. There used to be a societal stigma in acknowledging mental health issues. I see that going away. Everyone unabashedly admits the real stress they are under. COVID-19 has put so many people into depression and mental stress. The initial models are omni channel: so, there will be a tech and an offline play. Going forward, tech will become increasingly more present. This morning, I was speaking with a company that’s building digital twins sitting out of New Zealand. Soon you may find that your best friend is actually a digital entity. And the psychotherapist could easily be an AI-powered digital entity. In the near term, hybrid models a great opportunity for startups.
BM: On mental health specifically, what is required in India is a hybrid model. A bot-only model will not work. The reason being the culture in India is more reactive rather than proactive. In the US, people are used to going to therapists even when they feel slightly depressed. Here, most people react only once they suffer a breakdown. Anybody who is trying to build a business has to be omni channel from day one.
When it comes to healthtech or insurtech solutions, we’ve been talking about global players like Walmart, Amazon, Apple and the Google reshaping this space. In India, could local giants like Flipkart, Zomato or Ola become full-fledged players?
AM: Historically, unlike China and Southeast Asia, India hasn’t seen true platform companies emerge. Each category has different market leaders. History is not a reflection of the future and so it’s not impossible. There will be attempts and some may be successful.
But my personal view is irrespective of the approach, they will get some market share. But there will always be independent leaders fully focused on solving the issues in the space. In insurance, we already have Policybazaar, who is market leader. Similarly, other players will solve different aspects of insurance and they will coexist with platform companies like Flipkart.
Do you see startups like Kenko Health riding on Ola or Flipkart, where you focus on the tech and rely on the platforms for distribution?
AS: Absolutely, that’s an asset light approach and works well for us, if someone has done the hard work of getting to a person who is otherwise unreachable. Earlier, when ITC and other large Indian FMCGs reached a remote village, other products would be distributed on the back of that mechanism. That’s exactly what we are doing, at least in retail.
SaaS is perhaps the hottest sector in the country in India currently, for investors. Can insurance adopt as a SaaS model?
BM: Are the margins sufficient to overcome the cost of customer acquisition? Because what we’ve seen with insurance is that it’s very much a ‘push’ purchase, particularly health insurance. Policybazaar has a call centre of 4,000 staff, convincing people to buy insurance. If the margins can be sufficient to overcome customer acquisition cost, it can definitely be a subscription model.
What’s your road ahead for 2022?
RS: We will invest in funds as well as make direct investments. We are very excited about the role IFC can play in direct investments and are active on the boards. Many of these business models are going beyond country borders and becoming regional or global.
After a funding boom in India this year, we’ve had 36 new unicorns. Can startups revive India’s economy?
BM: It’s great that all this money is coming in and it will definitely help. I hope startups will build profitable business models. Raising money is so easy that they’re not under pressure to turn profitable anytime soon. You have to go after growth, but you also need a model that turns profitable at some point. When you have public companies losing money, with no path to profitability in sight, it’s worrisome. Hopefully my worries are unfounded.
For more information on Kenko Health, please visit its official website