Future Generalli India’s new Ad mantra

For those who do not switch channels during commercials, there is a high chance that you came across this new campaign from Future Generalli India called “Ab Nibhao Ristedari”. But unlike other advertisements, this one targets the insurance agents. It invites the insurance agents to come and join the growing family of Future Genralli India.
A common advertising trend shown by the insurance companies as well as banks is to target the cultural and sentimental ethos of the country. Taking cue from it, FG’s new ad shows how an insurance agent becomes a part of the families he comes across. An insurance agent is someone who builds the bridge between a company and individuals. Tapping this through an advertising campaign sure looks like a nice strategy.

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IRDA plans to change lock in period for stake sale

Effectively managing capital and coping with long gestation period are two factors which determine which companies survive in the competitive insurance market. Earlier this year in June, Sunil Mittal decided to sell its 74% stake both in Bharti Axa Life Insurance and Bharti Axa General Insurance to Mukesh Ambani precisely for these reasons.

Acknowledging this, Insurance Regulatory and Development Authority (IRDA) already has Article 6AA of the insurance act in place. However some aspects of this act may soon change. Currently the guidelines says that promoters holding a 26% stake in life insurance companies needs to be locked in for a period of 10 years. But news is brewing that a new IRDA guideline would allow promoters to escape as early as 5 years. The new draft however does not apply to those promoters subscribing to IPOs of insurance companies. The draft guideline is expected in August and after public comments and recommendations, the final guideline is expected in October.

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This week’s top Investment News in the Insurance Sector

Some of the top investments news in the investment sector this week

• Reliance Life Insurance plans to divest 23% stake in the domestic public and private lenders or banks. This come after Reliance has already signed a pact to sell 26% to Nippon Life. Some of the banks which have taken interest in this deal are Axis Bank and Syndicate Bank
• Exide plans to pump in another round of investment in ING Vysya Life Insurance Company. This time the amount would be somewhere around Rs 150 crore. It should be noted that Exide has already been investing in ING Vysya Life Insurance.
• Piramal Healthcare is planning to buy Enam Financial’s stake in ING Vysya Life Insurance. The present valuation of the insurance company stands at Rs 2400 crore. Last year Piramal Health got Rs 17,190 crore from Abbott Laboratories for its generic unit.
• Life Insurance Corporation of India (LIC) plans to invest more than Rs 2 trillion through the March fiscal. Apart from this its planned investment in equities will exceed last year’s Rs 400 billion.

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Low Health Insurance renewal ratios of Reliance Insurance

Low Health Insurance renewal ratios of Reliance Insurance

Health Insurance Policyholders of Reliance Insurance are an unhappy lot. That is because of the steep increase in health insurance premium that Reliance has announced. Till as  recently as last year, the rates quoted by Reliance for health insurance were amongst the lowest in the industry if not the lowest. This was part of a strategy to acquire as many customers as possible. While the acquisition strategy worked, the problems came in later as Reliance started incurring heavy losses on their health portfolio. This forced Reliance Insurance to increase their premiums by as much as 400-500% across certain categories. Such an increase in premium rates was unheard of in the Indian Insurance industry.

But this created another problem. Customers were not prepared to accept this steep increase in their health insurance premium and stopped renewing their policies. If certain rumours are to be believed , the renewal rate on their health insurance policies fell to as low as 10%-25%. The market rate is typically around 75% to 90%. One has to understand here that in the case of health insurance, the policyholder mostly wants to renew as he is deeply inconvenienced by shifting to another insurance company as his pre-existing diseases would not be covered. This is because currently there is no health insurance portability in India. Thus, it is significant to note that even when there is such a discentive to not renew, existing policyholders of Reliance General are still not renewing. The bait and switch model which Reliance thought they will use on their customers did  not work well.

Given the dismal renewal rates due to the insurance premiums having been jacked up, Reliance Insurance is understood to have requested IRDA ( the regulator) to allow them to revise their pricing downwards. Unconfirmed reports suggest that IRDA  has disallowed the request. Be that as it may, this teaser rate strategy of Reliance Insurance is not at all confidence inspiring, especially for an organization whose Life Insurance arm cannot seem to wait to tap the equity markets through an IPO. In some ways, the market has already given a thumbs down to Reliance Insurance with its market share down by as much as 40% in the six months ending September 2010 over the corresponding period in 2009.

Growth of medical tourism in India

While we fret about the rising healthcare and health insurance costs in India, there is the growing trend of tourists from Western Europe, North America and the Gulf visiting India to get themselves treated. This is primarily because of the fact that healthcare costs in India still are significantly lower than in the West, and the quality of healthcare at these private hospitals is comparable to the best in their home countries. A heart valve replacement which costs USD 8000 in India could set the health insurance company back by as much as  USD 150,000 in the United States. A crude rule of thumb is that surgery in India typically costs 1/10 of what it would in the US. Another problem that many of these visitors face is that many of the procedures that they would like done are not considered critical (elective) by their local healthcare system, and thus they would not be able to avail of them under their health insurance policy in their countries. Even though aftercare can become an issue, the benefits far outweigh the negatives as far as these visitors are concerned.

 

Hospital groups such as Max, Apollo, Fortis etc have aggressive sales arms focusing purely on the medical tourism aspect. Cardiology, cardiothoracic surgery, knee replacement, and cosmetic surgeries are the most in favour as the cost differential is especially marked across these areas. Many of these hospitals have started entering into agreements with the international health insurance companies to reimburse the cost of healthcare of these visitors. In 2007, according to a study by Deloitte, India received almost  half a million medical tourists. The annual growth rate for medical tourism is estimated at 30%. McKinsey estimates that this will be a USD 2 Bn market in 2012. The global medical tourism market is worth USD 60 bn, and thus there is a big scope for India to get a larger share of this pie. The Indian government has been keen to tap this market, and has introduced one year special medical  visas for visitors.

One ill-desired offshoot of growing medical tourism is that the healthcare costs charged by these private hospitals might end going up even for domestic patients. The hospitals, which run as for profit corporate entities, do not need much time to get used to the concept of higher revenues, and will assume it as their natural right (greed, greed!). We have seen that in the IT Industry- as offshoring through India took off, IT costs that the key companies such as Infosys, Wipro, TCS charged to their Indian clients went up. At the end of the day, this is a labour arbitrage game, and with time, the differential will reduce. But that still seems quite some time away. There is something inherently seductive in getting your knee replaced, tummy tucked,  and walking around the monument of love, the Taj Mahal!

Another issue that some activists have is that most of these corporate hospitals have been set up using massive subsidies in the form of cheaper land, lower financing costs and tax breaks. Thus, in a sense, the subsidies are being transferred from the Indian tax payer to the affluent, well heeled tourist. Though there are regulations regarding the free healthcare quota that these private hospitals are subjected to, they find their way around it- like in most things in our country.

Ways to resolve your grievances against insurance companies

Insurance companies not staying on their commitments is not a new thing for policyholders. There are examples galore on the subject. A person underwent 3 surgeries simultaneously with the total cost amounting to Rs 33K. When the claim was lodged the TPA said that though the surgeries were pertaining to 3 different body parts but were conducted at the same time, hence the eligible claim was only Rs 10K. 

Despite the person explaining that the company would have to shell out larger amount of money had the insured decided to undergo all the 3 surgeries at different times, the company still didn’t agree. Ultimately the insured approached the Insurance Ombudsman who held that the eligible claim was Rs 30K.

It’s not that the policyholder is at the mercy of the insurance companies. The IRDA has recently come up with certain regulations that protect the interests of the policyholders and has promised that the Insurance Ombudsman would be empowered further.

While regulations coming into effect may take a while, one must get acquainted with existing grievance redressal infrastructure and the procedure to be followed to make oneself heard.

Level One: For complaints registration, most insurance companies provide various channels like branches, phone call, e-mail as well as snail mail to policyholders. If the customer services department is not helping one can approach the company’s grievance redressal officer. Insurance companies are also required to maintain a well-defined procedure for receiving and resolving grievances at their branches, too.

Companies have to specify a time frame within which different types of grievances must be resolved. While they can decide the time limit, they are required to send a written acknowledgement within 3 working days of the receipt of the complaint. Any failure to do the same would make the companies liable for penalties.

The insurance company will have to inform the individual with the acknowledgement if the complaint is resolved within 3 days or else they will have to resolve it within 2 weeks of the receipt of the complaint & send a final letter of resolution. If the company decides to reject the complaint, it has to give a valid reason with information on further redressal avenues that the insured can pursue. If one does not react within eight weeks from the date of receiving the insurer’s response despite being dissatisfied with it, the company will assume that the complaint has been resolved.

Level Two: If the redressal officer didn’t help one can approach the IRDA’s Grievance Redressal Cell or the Insurance Ombudsman, depending on the nature of the complaint. The Ombudsman’s offices are authorized to mediate and award compensation to policyholders. They can handle cases involving insurance contracts upto INR20 Lakhs.

The Ombudsman makes recommendations within 1 month of the receipt of the complaint. Once one receives a copy of the recommendation, he/she has to send a written communication indicating the acceptance of the settlement within 15 days. The insurance company also has to comply with the order given by the Ombudsman. If still unsatisfied with the verdict, one can approach the civil courts or consumer forums.

The kinds of complaints that can be heard by the Ombudsman are the ones that relate to ejection (whether partial or total) of claims, in addition to disputes about premiums; policy wordings in case the disputes relate to claims; delay in settlement of claims and non-issuance of any insurance document after collecting the premium.

Irda’s Grievance Redressal Cell

Unlike the ombudsman, this redressal cell does not have the authority to pass orders but complaints addressed to the cell are taken up with the insurers which could include delay or lack of response pertaining to policies or claims and complaints about agents’ conduct.

The awareness about Ombudsman is still very low, IRDA’s campaign has been creating awareness about the recourses available to the policyholders. The toll free number widely publicized is 155255. One can approach the cell directly and he/she will be redirected to the Ombudsman under whose jurisdiction the complaint falls. One can get in touch with cell via email or snail mail as well (info is available on IRDA’s website).

One must ensure that the complaint is sent by him/herself because the ones forwarded by third parties including lawyers or agents are not entertained by the cell. The complaints with incomplete information are also not heard. Therefore, it is very important to disclose all the details in the complaints registration form available on the insurance regulator’s website.

One must be alert while dealing with insurers and follow laid down for the proper solution to the problem.

Health Insurance Claims to get time-bound

After showing a lot of leniency, public sector insurance companies have finally decided that they will deny claims to policy holders if they fail to submit the relevant documents post discharge within the stipulated time period. This will help check fraud in the reimbursements process.

Many private insurance companies have flatly refused processing of claims if the relevant documents have not been submitted beyond the specific number of days. By doing so they have been able to control their adverse claim ratios.

Public sector insurance companies are now saying that health insurance claims have to be submitted within seven days from the discharge date. In certain cases, the insurance company will entertain claims upto 15 days from discharge date. However if the claim is beyond 15 days from the discharge from the hospital, then this has be approved by someone at the regional manager level.

Toriental Insurance company also asks its TPAs to get the papers from the policyholder within 7 days as specified in the policy and in exceptional cases, these papers can be submitted within 30 days.

New India Assurance Company has also approached the Insurance Regulatory and Development Authority (IRDA) to allow them to curtail the stipulated period for submission of claim paper from the existing 30 days to seven days.

An official from New India Assurance Company said that an internal analysis has shown that allowing an inordinately long period post hospitalization for claims to be made only benefits the fraudsters from putting in fraudulent health insurance claims. The more the time available, the more time the scamsters have to prepare fraudulent papers in support of their claims. It is difficult to carry out investigation with the hospitals for claims that come in many months after discharge.

However , one also has to note the fact that just because the patient has been discharged does not mean that he (s) has been completely cured and there might need to be significant post hospitalization claims. A balance needs to be struck in terms of fixing the timelines for your health insurance claims.

Cashless Health Insurance…the script develops

The standoff between the public general insurance companies and the top hospitals has softened a bit, with the public insurers mentioning that they will entertain cashless claims for now. But there is a huge gulf between this public posturing and reality. For all practical purposes, the preferred hospitals are not entertaining cashless claims from their patients/customers.

The basic premise of the premium hospitals is that the patient has to pay for premium quality, and thus all hospital procedures between the premium hospitals and non premium hospitals cannot have the same price. But that is only half the truth. The public insurers argue, and justifiably so, that hospitals inflate bills tremendously when the patient has a cashless cover. The patient does not appear to be too bothered as he is not paying himself. The public insurers are now putting pressure on the premium hospitals to draw up a matrix where the expenses for the bulk of the procedures for which claims are paid are reduced by 30-40%.The hospitals are , as expected , fighting it. But sooner or later they will have to yield as their patient volumes are reducing drastically.

Another interesting development in this entire saga is that the public general insurers have now decided to set up their in-house TPA as they feel this will help in reducing their claims ratio. Some of the private insurers, for e.g. ICICI Lombard, already have their in-house TPAS. For a moment, let us step back and understand what is a TPA.

A TPA ( Third Party Administrator) is an organization that processes insurance claims. They sometimes handle the whole gamut of services such as claims admission, claims administration, interacting with the hospitals and claims payout. TPAs are paid by the Insurance Companies, and thus at a fundamental level, their loyalties lie with the insurance company. TPAs essentially connect the policyholder, the insurance company and the hospital, and thus are a crucial element in the entire insurance process. TPAs were set up first in 2001, and their core purpose was to act as an intermediary between the policyholder and the insurer. They play a very important role during the entire cashless hospitalization process. Policyholder cards are issued by the TPAs, and once the policy has been issued, the TPA remains the central point of contact between the insured and the company. Cashless claims are disbursed by the TPA to the hospital.

Now the four public sector insurance companies would like to set up an in-house TPA, and have invited expressions of interest from various parties. 25% stake in this TPA entity would be with the external entity and the balance stake would be with the insurance companies. The insurers feel that this will help in reducing the claims ratio which is in excess of 130%. The frauds that are committed might go down as the controls would be tighter. The other factor that would come in is that there would be economies of scale achieved- currently the four public companies work with as many as 30 TPAs. Because they are fragmented, the TPAs do not have bargaining power with the hospitals. One big entity would be able to squeeze out far better rates from the hospitals. This new entity would be operational by July 2011 and over a period of 2-3 years, the public health insurance companies would look at transferring their entire business to this entity.

Health Insurance Portability

We have all heard of mobile number portability (that it gets perpetually delayed is another matter altogether!). Similarly, the Insurance Regulatory and Development Authority (IRDA) is now working with an aggressive timeline for Health Insurance Portability. At a simplistic level, health insurance portability means that the insurance policyholder can transfer the health insurance policy on renewal from one insurance company to another, without losing any of the accrued benefits.

The basic idea is to enable the insurance policy holder to continue with a minimum base cover that is constant across all insurance companies. Today, if you acquired an illness during the earlier policy term, it is treated as a pre-existing one by the new insurer, and thus people (especially senior people) find it very difficult to change their health insurance company even though they might be dissatisfied.

This is a boon for policyholders. What it does is that it ensures that the insurance company with whom you are currently insured cannot afford to take you for granted (irrespective of what the customer service department would like you to believe, you are nothing but a revenue stream for the insurance company!). It also will make the health insurance company think twice before frivolously rejecting any claims. The biggest advantage is that the policyholder is not tied down to one insurance company, and has an option when his existing insurance company might not want to cover his risk any more. This will also ensure that insurance companies will introduce more cost competitive and customer friendly schemes so that there is no switch by their existing policy holders, thus leading to a reduction in premium.

Currently, most health insurance contracts are one year contracts, and if there has been no claim, bonuses in the form of higher sum assured for the same premium, or a reduction in premium, is assured. However, if the policyholder wants to move to another company, the bonuses are not transferred and the policyholder pays the base rate. For senior citizens who bought the original health insurance policy many years earlier, it becomes even more difficult to shift as the insurance companies are reluctant to sell new policies to the elderly.

Some of the major issues such as data exchange, bonus transfer and two policies being different are being worked out. According to senior officials, the basic product has already been developed by GIC and is now awaiting the approval of IRDA. Health Insurance portability will most probably be available for sum insured upto Rs 1 lakh or 2 Lakh ( we recommend 2 lakhs). Since two mediclaim policies are hardly ever identical, GIC is working towards a common minimum benefit which can be carried forward if one decides to change the insurance company.

Accumulated bonuses on claim free policy will not be carried forward and extended cover will be treated as a new policy. On the base cover, there will be no exclusions on the basis of cooling off time or pre existing diseases. While portability might take away customization of health insurance policies, it is a small price to pay for the freedom of knowing that the health insurance company cannot twist your arm when you are at your weakest.