Health Insurance: A growing market

Health Insurance penetration in India is only 3% in India as compared to 10%+ in countries such as US, Korea, UK etc. Insurance per capita in India is an abysmal USD 1 whereas in the US , it is more than USD 2000. It is estimated that only about 3% of Indians are covered by any private insurance plan.

The current market for health insurance in India is about Rs 8000 crores and it is expected to increase at a CAGR of 20-25% over next 10 years. Some of the key drivers for the growth of this industry is as follows:

1. Increased healthcare costs in India, forcing people to take up health insurance
2. Rising affluence of the Indian middle class and thus being able to afford health insurance
3. Increasing trend of lifestyle related diseases such as diabetes, heart ailments forcing
4. Rise in number of people visiting India for medical treatment
5. Continued tax benefits for health insurance related premiums
6. Government initiatives to increase health insurance awareness
7. Specialised health insurance companies entering and growing the market

Over the next few years, we expect some hardening of rates for health insurance premiums as the current claims ratios (especially of the public general insurance companies) is way too high and they are making underwriting losses. We also expect the processes to get streamlined with captive TPAs being set up, standardization of rates for different procedures carried out by the hospitals and a greater degree of co-pay.

Health Insurance Portability: Clarity Required

There still does not seem to be too much clarity on health insurance portability in India. As per industry sources, health insurance portability will come into effect from July 1. It is still anybody's guess as to how pre-existing diseases, which is at the heart of portability, will be treated by the new insurer. There is one concern that health insurance portability might lead to increased costs for the consumer desiring to port, as the new company can use increase pricing as a ploy to turn down underwriting which they think might not be profitable. One concern area for health insurance companies is that they dont have access to a centralised database which has the claims history and health records of every insured person. In the absence of that, it becomes difficult to price the risk

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.

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.