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Medical insurance industry in Canada worth USD 73 B by 2024

Canadian Medical Insurance market is in the growth stage and was estimated to reach USD 44.7 billion in 2018. It is expected to grow at the CAGR of 7.5% during the forecasted time period of 2019-2024 because of the increasing number of chronic illnesses and rising health care costs.

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Definition / Scope

Medical insurance is the type of insurance that covers the whole or part of the medical expenses through the system of risk pooling in the health care delivery system. It includes insurance for accidents, disability, or accidents, which is either administered from the government agency, private business or not for profit organization. Here, an insurer has to pay for monthly premiums or payroll tax specified in the insurance agreement.

In the context of Canada, provinces, and territories have their own universal health insurances and the health care delivery system is publicly funded. Health services are mostly provided free of cost to the citizens. However, it doesn't cover prescription drugs, home care, private hospital rooms, prescription glasses, hearing aids, cosmetic surgery, counselors, physiotherapists, and dental care. For this, they have to pay for these services either from out of their pocket or through private medical insurance and employer plans. About two-thirds of Canadians i.e. 25 million had supplementary health insurance and about 12% of total health expenditure from private insurance in 2018. The medical insurance market is segmented into the following types:

  • Publicly-funded Insurance/ social security scheme
  • For-profit private organizations
  • Not-for-profit insurance companies
  • Co-operatives

Market Overview

In Canada, publically funded social security scheme and private health insurance are available. Public health insurance is run through the taxation system and almost all Canadians are covered providing benefits of coverage of 70% of all medical expenses. In order to get full protection from the high cost of health care services, Canadians prefer private health insurance. Canada is holding the second position for the private health insurance expenditures among the countries in the Organization for Economic Co-operation and Development. Almost 60% of Canadians are covered by private health insurance.[1]

The market size of the medical insurance in Canada was estimated at USD 47.37 in 2018, increased from USD 22.7 billion in 2010 [2]. It is expected to grow at the CAGR of 7.5% within the forecasted period of 2019-2024 and will reach USD 73 billion by 2024.[3]

In the Canadian medical insurance market, for-profit organizations account for almost 80% of the total medical insurance market and were valued at USD 35.25 billion in 2018.[4]

Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet


Top Market Opportunities

  • Growing geriatric population and increasing chronic diseases

In the context of Canada, the elderly population with age more than 85 years represent almost 2.2% of the total population. The number of the elderly population has been increased by almost 19.4% within the time period of 2011 to 2016. It is about four times more than the growth rate for the overall population. Along with an increasingly aging population, chronic diseases such as diabetes, hypertension is also in increasing trend. Because of this, the use of the antihypertensive drug is increasing at the rate of 5.6% per year.[5] As the public insurance system doesn't cover the prescription drugs, this growing treatment of chronic disease will drive the market for private insurance companies.

  • Increasing immigrants and Healthcare act for immigrants

In the context of Canada, annual immigration admissions are increasing annually and are expected to be almost 40,000 more in 2021.[6] Immigrants with the residence of fewer than 3 months aren't entitled to the treatment procedures funded by public healthcare delivery system. As the out of pocket expenditure is quite high, they prefer private health insurance to minimize the health cost risks. It will create a significant environment for the growth of medical insurance.

Market Drivers

  • Increasing medical care costs

Over the past two decades, the health care costs have been increased by almost 70%[7] and a family has to pay USD 12,935 in 2018.[8] The costs of the drug are expected to grow at the fastest rate of 4.2% per person.[9] It is the driving the demand for the medical insurance to minimize the risk of rising health care costs.

  • High opportunity cost and limited health benefits from public health system

In Canada, the government typically pay almost 70% of all medical costs through the tax-based insurance system. However, costs related to medical drugs, dental services, eye care, etc aren't covered and the patients have to pay through the out of pocket. In spite of the high quality of care by the public healthcare system, almost 60% of Canadians are covered by private health insurance[10] because of the high waiting time. ALmost 57% of Canadians wait for more than 4 weeks to seek specialist care (orthopedic surgery, cancer). This long waiting hour is driving the public towards the private insurance system.

Market Restraints

  • Increasing inefficiency of private health insurance

In the context of the private health insurance system, the administrative expenses cost higher than that of the public sector. For instance, the overhead expenses of the private health insurers are almost 10 times higher than that of the publicly funded insurance system. Over the past two decades, the differences between the premium and benefits have tripled. It will demotivate the people to get insured by the private health insurance system, which in turn will restrain the growth and development of the medical insurance market.

Industry Challenges

  • Highly fragmented market

Some of the leading players such as Sunlife, Manulife, Great Westlife, which contribute to the almost 65.3% of the total insurance market in 2018.[11] Because of this, it is quite challenging for other remaining insurance companies for the growth and sustainability of the market.

Technology Trends

The insurance companies are adopting the technologically advanced system for insurance, which is making the insuring procedure simple, efficient and automatic. Some of the technological changes are discussed as:

  • Digitalization in services: In order to provide individualized personal services and address the unique personal needs, insurance entities are adopting the digital media for the communications and personalized offerings.
  • Robotic process automation: Here, robots as software tools mimic human actions and automate repetitive tasks across the business apps and web portals, which are used to simplify the business processes and to reduce the costs.
  • Fintechs and blockchain: Fintechs are used to solve the specific issues and deliver high-quality digital experiences in the aspects of the insurance. Blockchains and sensor hardware are used for more efficient claims management, fraud detection and reduce management costs.

Pricing Trends

The Canadian receives publically funded health services through taxation and pays almost USD 2000 per person for this universal health insurance from their taxes. However, in province B.C. and Alberta are two provinces which charge the premium to the residents. It costs USD 69.25 per month for medical care for more than USD 30,000 per year. In the context of private insurance, the price varies on the basis of the type of coverage, insurance plans, the extent of the health benefits, and its service quality. On average, the Canadian household spends almost USD 4000 as premiums for private insurance.[12] The average prices of the private health insurance providers are discussed as:

Canadian Medical Insurance price.png

Regulatory Trends

In Canada, the office of the Superintendent of Financial Institutions at the federal level are responsible for financial regulations. The provincial government is responsible for the regulation of the provision of private health insurance. The insurance premiums are regulated and charged by insurance companies. Some of the government policies regulating the insurance market are discussed as:

  • The Medical Care Act, 1996: It enacted that all Canadians will obtain the health services of high quality on the basis of their health needs irrespective of their ability to pay through a publicly funded universal insurance scheme.
  • The Canada Health Act: It establishes values and principles for the publicly funded health insurance plan in order to qualify for federal funding through the Canada health transfer. However, it doesn't regulate health insurance plans.[13]
  • Health Insurance Act: It has set the criteria and conditions for the delivery fo insured and extended health care services. In accordance with this act, the cost of all the services offered by professionals are determined and the supply of medical and equipment.

Market Size and Forecast

The market size of the medical insurance in Canada was estimated at USD 47.37 in 2018, which has been increased from USD 22.7 billion in 2010 [14]. It is expected to grow at the CAGR of 7.5% within the forecasted period of 2019-2024 and will reach USD 73 billion by 2024.[15]. About 25 million people had supplementary health insurance and about 12% of total health expenditure from private insurance in 2018.

By type of health services

  • In 2018, the hospital services held the largest market share in publicly funded universal health insurance system, which is expected to grow at the CAGR of 3% as shown in table 1.
  • In the private health insurance system, the drugs hold the largest market size with the value of USD 11.3 billion as the prescription drugs aren't covered by public health insurance.

By type of insurance company

  • Public health insurance is provided by the Canadian government on the basis of the tax-based funding system. The total health care expenditure was expected at USD 253.3 billion in 2018, almost 11.3% of GDP of Canada.
  • For-profit insurance companies hold the largest market share of 80% of the total market. The market size of for-profit organizations was valued at USD 35.25 billion in 2018.[16]
Canada insurance spending.pngCanada Insurance market size.png

Market Outlook

Canadian Medical Insurance Market is expected to grow at the CAGR of 7.5% within the forecasted time period of 2019-2024. It is estimated to reach USD 73 billion by 2024 because of the increasing chronic illness and rising health care cost associated with its treatment.

Canada Insurance future market size.png

Distribution Chain Analysis

In Canada, insurance services are provided by both government and private health insurance companies. Publically funded health insurance are tax-based and private health insurances are funded by the premiums. Private insurance services are provided by individual and group sales. The most widely adopted distribution channel of medical insurance in Canada is group sales through medium large-sized employers. Here, Managing General Agencies is the largest channel accounting almost 30% of all new premiums. Besides this, there are some associated general agencies too in order to support the independent financial advisors.

Canada Insurance Distribution.png

Competitive Landscape

There are almost 130 insurers engaged in the medical insurance market. However, the top three leading market players i.e. Sunlife, Manulife, and Great Westlife had contributed to almost 65.30% of the total insurance market in Canada in 2018.[17]

Key Market Players

  • Manulife: It is a private insurance company established in 1887 with its headquarter in Toronto. It has almost 73,000 contracted agents.[18]
  • Sun Life Financial: It offers health insurance policies, investment products, and wealth management services all over the world in Canada, Asia, the United Kingdom, and the USA.
  • GreatWest Life: It is one of the private insurance company established with the motive of gaining profit by selling shares of insurance on the stock market. It offers individual and family plans for extended health.
  • Pacific Blue cross: It is providing insurance plans, especially in Ontario and Quebec. It provides policies for only families but not individuals.
  • Ontario Blue Cross: It is one of the trusted insurance company offering health and travel insurance policies in Canada.
  • Blue Cross Canada: Its plans are operated on a not-for-profit basis in every region of Canada for its members.[19] Its membership plans are associated with the Canadian Association of Blue Cross Plans.

Strategic Conclusion

The medical insurance market is in the growth stage in Canada and is expected to grow at a rate of 7.5% because of the increasing number of chronic diseases and rising health care costs. However, inefficiency in private insurance plans might restrain the growth of its market. So, the market players should be focused on the development of automated specialized insurance plans with the introduction of technological software and digital media.

References

  1. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4150733/
  2. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4150733/
  3. https://www.mordorintelligence.com/industry-reports/canada-health-and-medical-insurance-market
  4. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4150733/
  5. https://academic.oup.com/eurheartj/article/30/12/1434/550995
  6. https://www.cbc.ca/news/politics/canada-immigration-increase-350000-1.4886546
  7. https://torontosun.com/2017/08/01/canadians-health-care-costs-have-skyrocketed-study/wcm/495190a8-ff3e-4016-aea2-43c61b4e6d3d
  8. https://globalnews.ca/news/4364344/cost-health-care-canadian-families/
  9. https://www.cbc.ca/news/health/cihi-health-costs-canada-report-prescriptions-pharmacare-1.4390945
  10. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4150733/
  11. https://insurance-journal.ca/article/three-insurers-corner-two-thirds-of-the-canadian-market-for-over-a-decade/
  12. https://www.monster.ca/career-advice/article/how-much-are-health-benefits-canada
  13. https://laws-lois.justice.gc.ca/eng/acts/c-6/page-1.html
  14. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4150733/
  15. https://www.mordorintelligence.com/industry-reports/canada-health-and-medical-insurance-market
  16. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4150733/
  17. https://insurance-journal.ca/article/three-insurers-corner-two-thirds-of-the-canadian-market-for-over-a-decade/
  18. https://www.investopedia.com/articles/markets/082615/5-biggest-canadian-insurance-companies.asp
  19. https://www.blueadvantage.ca/CABCP.aspx

Appendix

  • USA= United States of America
  • GDP= Gross Domestic Product
  • USD= United States Dollar


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