Religare Health Insurance explores the Bancassurance channel

The bancassurance channel has always been a promising distribution channel for the insurance companies. Through it the insurance companies can use the bank's network to reach out to the different areas of the country. All major insurance companies are tied up with banks to increase penetration to the different parts of India. 

The newest in the line exploring this idea is Religare Health Insurance Company Limited (RHICL). The standalone health insurer which began operations in the year 2012 is planning tie -ups with several banks to expand its bancassurance channel. According to CEO Anuj Gulati, the company would break even by 2017-18. 

Till now banks have been following a corporate agency model where a bank can represent one life insurer, one general insurer and one standalone health insurer. The recent relaxation of the Insurance Regulatory and Development Authority (IRDA) to banks allows them to act as brokers as well. This gives the bank the option to pitch different insurance companies products to the same customer. This option is however still to be approved by the Reserve Bank of India, the regulator for Indian banks. Religare's CEO is open to tie up with banks functioning as brokers

Looking for Life Insurance? Click below to get the best deals :

Insurance for HIV Positive People in India

Insurance for HIV positive people in India may soon become a reality. In one of its most humanitarian moves, Insurance Regulatory and Development Authority (IRDA) of India has asked insurance companies to put in place a board approved underwriting policies with respect with life insurance for people living with HIV/ AIDS. The underwriting policy is to cover clear guidelines on life insurance with people living with HIV/AIDS (PLHA). IRDA has also asked the insurance companies to put in place underwriting policies for health insurance offered by life insurance companies to people acquiring HIV/AIDS after the commencement of insurance policy. Guidelines also facilitates conversion of the lump sum amount into an annuity for life, if the insured became HIV positive while holding the policy

Unlike India, insurance is available for the HIV people in the West. The Indian insurance market is quite aggressive on their financials and costing. The guidelines provided by IRDA are more humane and less lucrative. Experts feel that this initiative might not be welcome by the Indian Insurance Companies. That is, of course, unless IRDA decides to take a leap ahead and impose mandatory bindings on the insurance companies.

Looking for Life Insurance? Click below to get the best deals :

A few disturbing facts

A few disturbing facts:

80% of healthcare costs in India are paid directly by the people, ie outside of health insurance and govt support
It is estimated that every year, healthcare pushes back 3.9 crore people back into poverty
Every year, an average Indian pays Rs 3000 annually towards healthcare costs. Our per capita annual income is  about Rs 55,000. That is nearly 6% of the annual income of the average Indian!
The government spends only 1.1% of the country's GDP on healthcare. We spend more than 2% of our GDP on defence

While the average Indian struggles with healthcare, medical tourism is expected to become a USD 2.3 BN industry in India.

Exclusions in a Health Insurance Policy

What does a health insurance policy not cover i.e exclude?

The moment of truth in an insurance policy is at the time when a claim arises. One of the most common reasons for a health insurance claim not being paid by an insurance company is when they say that the particular disease is not covered by the policy and is an “exclusion”. It leaves a bitter taste in the mouth of the policyholder and can sometimes put the policyholder in great financial difficulty. Thus, it is very important to know in detail about the exclusions in a health insurance policy before purchasing it. In our opinion, it is a far more important variable than price. A policy might be 10% cheaper than a competitor’s policy but might have many more exclusion clauses-in such a case, the policy with the lesser number of exclusion clauses would be the better choice for the policyholder.

In this article, we deal with some of the common exclusion clauses in a health insurance policy. Of late, we are seeing some innovation in this area with the new companies not excluding certain ailments which had traditionally been within the exclusions area

1. Maternity: In most cases, maternity and maternity related expenses are not covered in an individual or family floater health insurance policy. Maternity is typically covered in a group policy. In certain cases, we are seeing maternity being covered after 5 years into the policy.
2. Diseases or illness contracted within the first 30 days of the policy. The insurance company does this to safeguard itself against customers buying a policy immediately after a disease has been detected
3. Cataract, Prostrate, Hernia, Piles, fistula, gout, rheumatism, kidney stones, tonsils and sinus related disorders, congenital disorders, drug addictions, non allopathic/alternate treatments, self inflicted injuries,  hysterectomy, fertility related treatments, etc are normally not covered under a health insurance policy. Dental treatment and cosmetic surgery is also typically excluded.  Contact lenses cost is also not covered. HIV/AIDS is excluded, which has been a subject of great debate and criticism in the last few weeks. Some insurance companies do not cover treatment incurred outside the country, so you should check once before buying the policy
4. Pre existing diseases are not covered in a health insurance policy. Preexisting means a disease that you have had prior to joining a health insurance policy. The policyholder may or may not have been aware of the pre-existing disease. Further complications which arise due to the preexisting disease are also not covered. For example, renal problems which arise due to a person having diabetes at the start of the policy would not be covered. This can sometimes lead to a lot of confusion and heartburn. Someone gets admitted for a kidney related treatment, and the insurance company turns down the claim saying the kidney problem has arisen because the patient had diabetes, and rejects the claim. It can get a little grey here as medical science cannot sometimes clearly pinpoint the root cause of a particular disease outbreak. In most cases, preexisting diseases are covered after 3 or 4 consecutive policy years. This is the single biggest reason why one should buy a health insurance policy at a young age, and continue with the same insurer. Because if you shift to a new insurer, you lose your previous credit and a disease that was being covered by the old insurer might be treated as a pre-existing disease by the new insurer. We have noticed that insurance companies start facing more claims from the health insurance customers from their 4^th or 5^th policy year, as pre existing begins to get covered and the profitability of the portfolio goes down
5. Most policies do not cover day care, but a few  like Max Bupa cover daycare, although the premium is higher in this case
6. War related health insurance claims are mostly excluded from the policy coverage
7. Abortion related health expenses are not covered in a health insurance policy

Pl do note that with competition heating up, some of the exclusions mentioned above will begin to get covered by a company or two so that it can be used as a selling point. Thus, the lists mentioned above are subject to change. The moot point here is that 10 minutes spent to read the exclusions list of the policy you are considering to buy could save you a lot of headache buyer. Be an informed buyer- there will be no else to blame but yourself

Riders in Insurance

Riders and their use:

Riders are add-ons to insurance policies which help the policyholder cover himself financially for an additional set of risk events (and are not to be confused with Kolkata Knight Riders!!). They are the insurance industry’s innovation for customizing the insurance policy to the extent possible, while keeping a standardized base policy available. Riders provide additional risk protection, and thus the policyholder has to pay a risk premium. In most cases, riders can only be bought in conjunction with the base policy at the time of initial purchase, and cannot be added later. Riders are optional, provide pure risk, and do not have any investment or savings element to them.

Most riders are added on to Life Insurance policies, and have a significant tilt towards health related risk. Of late, we have seen that Motor insurance policies also have begun to offer riders along with the base policy.

Since the riders are typically bundled in with the base policy, they do not have any additional administrative charges or customer acquisition charges,  leading to a low cost.  IRDA has capped that the maximum premium that is paid for riders cannot be more than 30% of the base policy cost. Any benefit arising out of an individual rider cannot exceed the basic sum insured.

The issue in India is that the insurance sales agent is competing on price, and wants to convince the prospect to buy an insurance policy by showing him low price. When a rider is added on, the price of the insurance policy obviously goes up. Thus there is not much thrust on riders at the point of sale, leading to a take up rate for riders which is far lower than its potential.

Some of the most popular Life Insurance Riders are :

a. Double Sum Insured rider (mostly in Child Policies): In the event of a death to the parent, the sum insured is paid to the child (or guardian) at the time of the death, and an additional sum insured is paid at the maturity of the policy.

b. Critical Illness Rider (or Dread Disease rider): In this rider, the sum insured is paid to the life insurance policy holder in the unfortunate event of the policyholder contracting a critical ailment such as heart attack, renal failure, cancer etc. In most cases, the sum insured is paid to the policyholder and the policy terminates. Critical illness riders become more expensive with age, as the probability of contracting a critical disease increases. In certain cases, the insurance company would refuse the rider coverage to the insured due to their health condition at the time of entry. Thus it is better to buy the Critical Illness rider at a younger age.

c. Accidental Death and Permanent Total Disability rider Through this rider, an additional sum insured is paid to the nominee (in case of death) or to the policyholder in case of a permanent total disability.

d. Waiver of premium rider: This rider triggers in when the insured becomes completely financial unproductive (say through an accident or a disease) and is at the risk of not being able to earn. Under this rider, the insurance company takes on the responsibility of paying the premiums till the policy maturity at which stage, the sum insured (or the fund value) is paid to the insured

e. Spouse Insurance rider or Joint Life Rider: Through this rider, the insured and the spouse can be covered through a single policy. Sum insured is paid to the surviving member in case of death to one of the insured.

f. Guaranteed Insurability rider: Through this rider, you purchase the option of increasing your life cover at any significant life stage (marriage, birth of children etc ) which might increase your financial liability without needing to go through a medical examination.

g. Surgical assistance benefit rider: This rider provides much needed financial assistance to the insured during the time of a medical procedure needing surgery for 43 surgical procedures.

h. Investment Guarantee Riders: In case of negative market returns, this rider guarantees claim value to the extent of premiums paid.

Some of the Motor Insurance riders are :

Zero depreciation rider: Through this rider, the car owner can ensure that in the case of any claim, he is paid the full cost of claims on parts such as tyres, bumpers, windscreen etc. In the situation where the rider is not opted for, the insurance company would only pay the depreciated value of the parts whereas you, as the owner, would have a substitution cost which is much higher for the new parts

Return to Invoice rider: This rider ensures that in case of an accident or theft where the car is a total loss, the full invoice value of the car is paid to the car owner

Payments made towards riders (except Critical Illness and Health riders ) enjoy the benefits of Income Tax exemption under section 80C of the Income Tax Act. Critical Illness rider enjoys tax benefits under section 80 D. Proceeds received in the case of a claim are tax exempt under section 10 (10 D )

Indian General Insurance Sector a hidden gem

Standard and Poor's, in  a recent study on the Indian General Insurance sector has highlighted something that we always knew but did not appreciate enough: that India's general insurance sector is a goldmine, poised for excellent growth.

This conclusion stems from the fact that general insurance industry penetration as a percentage of GDP is amongst the lowest in India.  With a combined annual premium of Rs 40,000 crores, the Indian General Insurance sector is about 0.6% of GDP. With rising income levels, galloping growth rates in motor car ownership, increasing awareness of healthcare and healthcare related costs, greater predisposition to travel and home ownership, almost all the sectors within the general insurance industry are poised for impressive growth.

A few dark clouds loom though. The public sector insurance companies continue to bleed with significant underwriting losses ( masked by sale of family jewel investments). Third Party motor continues to be the biggest drain as far as underwriting losses go. Health insurance claims are also threatening to spiral out of control. The public insurance companies will have to get their act together as far as motor and health underwriting is concerned.

It is hoped that the government will relax the FDI norms allowing higher than 26% FDI in the insurance sector in India. This will greatly help in allowing more capital into this industry, leading to a better growth rate. It is also hoped that public policy, especially in the case of health and health insurance, will contribute towards a higher awareness for health insurance products.

At our end, we wouldn't be surprised if the non life insurance industry outperforms its more glamorous brother -Life Insurance- and becomes a 2 lakh crore industry by the turn of the next decade.

Rashtriya Swasthya Bima Yojana running into issues

Rashtriya Swasthya Bima Yojana (RSBY), which is the health insurance scheme for the Below Poverty Line (BPL) families in India is running into issues due to delay in payment of premiums by the Government and the delay in claims processing by the Health Insurance companies.

The salient features of RSBY are:

1. It aims to provide health coverage to BPL families who cannot afford to pay for health related expenditures. It is a nationwide scheme.

2.It has been rolled out by the Ministry of Labour. Each beneficiary is entitled to a health insurance coverage of Rs 30,000. It is effectively free for the policyholder with them needing to pay only Rs 30 to get enrolled in the scheme

3. There is no age limit and most pre existing diseases are covered

4. 25% of the health insurance premium is paid by the State Government and and 75% of the health insurance premium is paid by the Central Government

5. The policyholder has a choice of public or private hospitals. SmartCards are issued to the policyholder and the smartcard can be used in any RSBY empanelled hospital in the country. In that sense, there is no locational constraint.

6. The policyholder is entitled to cashless claims

5. 2.5 crore smart cards have been issued across 25 states

But of late, the government and the insurers have started pointing fingers at each other regarding premium payment and health claims payment. Rs 225 crores worth of premium which has to be paid by the State Government is now pending. The Central Govt has cleared its part of the premium payment obligation. Because the take up rate of the scheme has increased very rapidly, state governments have been struggling to keep up with their obligation towards the premium payment.

On the other hand, the government has expressed concern at the high level of claims pending with the insurers. While there has definitely been a great deal of fraudulent claims, the pending claims ratio is still way too high. The four public health insurers are yet to settle 50% of the claims. ICICI Lombard has 35% claims pending while Tata AIG has 28% claims outstanding.Mr Anil Swarup, joint secretary in the Labour ministry, has gone on record saying that the four nationalised general insurance companies have been very slow in the processing of health insurance related claims under RSBY.The official guideline in RSBY is that claims have to be settled under 21 days.The private insurance companies and the 4 public general insurance companies have exactly 50% market share under RSBY.

Indian Insurance market to be USD 400 BN by 2020!

A recent report by FICCI and BCG has suggested that the Indian Insurance market will grow to USD 350-400 BN by 2020, and will be the among the top three insurance markets in the heart. This sensational headline has warmed the hearts of many, and made everyone excited about the potential of the industry. It is worthwhile to bear in mind that the current market size is around Rs 3 lakh crores, which is USD 70 bn. So we are talking about a 5 times increase in the next 10 years. We feel this is too aggressive and is more a headline grabbing, stand out from the clutter, screaming for attention news item.

We would actually pay far more attention to some of the other items that the report mentions: 

1. Profitability is a huge issue for the Insurance industry in India, with the non life insurance industry having accumulated underwriting losses of Rs 30,000 crores and the life insurance industry have cumulative losses of Rs 16,000 crores

2. The agency model, the main distribution channel, is still proving to be unprofitable for the life and non life insurance sector

3.Insurance companies' obsession for topline growth has contributed to a inefficient, non sustainable operating model

4.Auto claims fraud, third party liability for motor and high level of claims for health insurance is crippling the general insurance industry in India

5. The recent tightening of charges for ULIPs has taken the wind out of the sails of the life insurance companies in India

Tax Savings through Insurance Plans

Come December and the mad scramble for investment proofs starts. Your employer's HR department will demand the details of the tax saving instruments that you claim to have done to save on your income tax every month. If you are not able to furnish those tax proofs, the rebates given to you will be reversed and it might happen that your take home salary in Feb and Mar is far lower than normal. So let us try and understand how you can avail the maximum tax advantages through savings instruments.

Life Insurance is a very popular way of saving on your tax liabilities. Section 80 C of the income tax states that investments upto Rs 100000 on life insurance and unit linked plans can reduce your tax liability by Rs 30,000, thereby making the effective premium Rs 70,000. On top of that, the maturity proceeds on your life insurance policy are tax exempt. This is the govt way of incentivising you to invest in life insurance as a long term savings instrument. Most probably, you already have availed of some tax benefits through your company PF etc. So if the PF contribution is Rs 40,000 for the year, the balance amount of Rs 60,000 can be easily invested in a life insurance policy. What makes the unit linked policies more attractive now is that the charges have been drastically reduced by IRDA a few months back. Lower charges essentially mean that the investment returns will be higher for you, as you are paying less for the insurance agent's commission as well as the management fees etc of the insurance company. Also, the fact that lapsation charges have been significantly reduced makes it a safer instrument in case you cannot continue the policy in the next few years. The only question you need to consider before putting in your money in a Unit Linked policy is whether the stock markets are already at a high level (Nifty at 6000). But then, it is impossible to time the markets (pl dont believe the CNBC guys) and any time is a good time to start. In the long term, your unit linked life insurance policy should do well. Be on your guard if the insurance agent tries to sell you a non unit linked/traditional product. Chances are that he is pushing this life insurance policy only because his commissions are higher.

Apart from this savings of Rs 1 lakh that you can make for a life insurance policy, you can save upto Rs 10,500 in tax through a health insurance policy. That is the maximum tax savings if you pay Rs 15,000 as premium for you and your immediate family, and Rs 15000 for your parents. Realistically speaking, the health insurance premiums that you pay would not be more than Rs 10000 to Rs 15000, on which you would save Rs 3000 to Rs 5000 of tax. Tax savings aside, if you do not have a health insurance policy, it is very important to consider having one. Health care costs, especially private health care in top tier hospitals, have spiked up exponentially and medical costs have the potential of financially crippling someone. In the United States, health care emergency costs are one of the leading causes of financial bankruptcy. A five day hospitalization can easily cost upwards of Rs 1 lakh. Before buying a health insurance, it is also useful to do a comparison of the premiums charged by different health insurance companies, as the rates can vary as much as 40% to 50% among companies. Sites such as www.policytiger.com can help you compare in a minute and make available the cheapest and best health insurance plan.

All said and one, one should have insurance for the sake of financial security. However, it does not hurt if there are attractive tax benefits to incentivise the purchase.

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 policies offered by Life Insurance companies

Traditionally in India, health insurance has been mostly offered by the general insurance companies or by the specialized health insurance companies. Of late however, we have seen that the life insurance companies have become very active in offering health insurance. Earlier, at best they would have a critical illness rider on their health insurance policies or a daily hospitalization allowance rider. But in the last year or so, this has undergone a significant change. Today, we see companies such as AEGON Religare Life Insurance, Aviva Life, ICICI Prudential etc aggressively promote their health insurance plans.

IRDA, under pressure from SEBI, to reduce charges on Unit Linked life insurance products, has rung in some sweeping changes on the structure and charges of these products. Somewhere along the line, life insurance companies started reducing the weightage on the protection component of the ULIPs and started concentrating heavily on the investment component. ULIPs in its core construct started being like mutual fund product, albeit with high charge structure and longer lockins. In the recent changes mentioned by IRDA, ULIPs necessarily need to have a protection level ( i.e. sum insured) of at least 10 times the annual premium if the insured is below 45 years of age, and 7 times the annual premium if the person is above 45 years of age. The other key changes relate to a 5 year lock in, level premium, minimum premium paying term of 5 years, surrender charges being capped, no surrender charges after five policy years, total charges being capped and evenly distributed across the policy years and pensions having a minimum assured return of 4.5%. Given these changes, there will be a basic degree of commodisation in ULIPs. This will result in life insurance companies paying far more attention to health insurance and term insurance as an area where they can generate incremental sales. Hitherto, these two products were a bit ignored by IRDA.

IRDA has come out with some interesting recommendations regarding the health insurance plans that Life insurance companies can offer. If the age at entry is less than 45, then the minimum annual health cover has to be 5 times the annualized premiums or Rs 100,000 whichever is higher. If the age at entry is more than 45 years, then the health cover has to be a minimum of Rs 75,000 or 5 times the annualized premium, whichever is higher. At no time during the policy can the annual health cover be less than 105% of the total premiums paid.

We heartily welcome this trend of life insurance companies concentrating on health insurance policies. It is very clear that the width and depth of distribution of life insurance companies is far higher than that of the general insurance companies. It is estimated that there are 3.5 million life insurance agents in this country. If the agency channel of life insurance companies gets excited about this product, health insurance penetration can only increase. Currently the health insurance market is estimated to be at Rs 8100 crores and expected to grow to Rs 35,000 crores in the next few years. It can do with all the help that it can receive from the life insurance companies.