Spreading the Cover wider

The health insurance sector, which is growing at a rapid pace, is all set to witness a sea-change with the ushering in of portability from July 1.

Sarbajeet K Sen/Money Today        Print Edition: March 2011

For Manpreet Singh, a 46-year old general manager in the human resources department of a Rewaribased (Haryana) Japanese joint venture company, portability in health insurance is coming a few months too late. He would have been a happier person had portability kicked in on January 1 instead of July 1.

For Singh has a curious case to narrate. Singh, a health insurance policyholder of a major general insurance company for the past four years, has suddenly landed in no-man's land.

At 42, Singh had purchased a family-floater health insurance policy with a Rs 5 Lakh cover for himself, wife Gurdeep (37) and daughters Rasleen Kaur (10) and Arshdeep Kaur (5), from a leading private sector general insurance company (name kept confidential on request). Things went smooth for the next few years and Singh sat out the waiting periods to get all pre-existing diseases covered and enjoyed the benefits of placing no claims over these years. In fact, the premium, which started off in the region of Rs 8,000 per annum, came down to Rs 6,347 for the policy term that ended on 20 January, 2011.


MANPREET SINGH, 46 YEARS
Insurance cover: Rs 5,00,000
Policy: Family Floater from a Private Insurer
Persons covered: Self, wife and two daughters
Previous premium amount: Rs 6,347
Renewal premium: Gross Rs 63,247,
Net Rs 53,760 (after 15% no-claims bonus)
I have been receiving calls from the company's agents offering to renew the policy at lower rates. They initially lowered the offer to Rs 30,000 and then to Rs 14,000. However, I was advised that I should issue a renewal cheque only if the company gives the new rates in writing since claims at a later date might be dishonoured.
However, Singh received a letter bomb recently from his insurer in the form of a renewal notice. As against the existing premium of Rs 6,347 the company asked for a net renewal premium of Rs 53,760. Yes, you read it right, Rs 53,760. That, after a 15 per cent no-claims discount over the gross premium figure of Rs 63,247, a 10-fold increase! Singh says he got no explanation from the company on the steep increase. The company's representatives have been haggling with Singh, offering to lower the amount but all on an 'unofficial' basis.

We wrote to Manpreet's insurer seeking an explanation. But, we too hit a wall. So, we took the renewal notice to K K Rao, general manager, health, Oriental Insurance, in case he could give us an idea. It took some time for Rao to come to terms with the renewal figure. "I have not heard of anything like this. I cannot explain the increase when there is a no-claims discount," a baffled Rao said, as he slumped on his chair in disbelief.

Manpreet, however, is not alone in his suffering. Sandeep Pahariya, another general manger in a private sector company in Delhi's Connaught Place, has an identical tale to narrate. A renewal notice for a similar Rs 5 lakh family floater ( a health policy that covers the entire family under a single contract) for Sandeep (44), wife Kavita (41), Son Mudit (18) and daughter Saloni (10) sent by his insurer demanding a premium of Rs 32,013 (after a 20 per cent no-claims discount on Rs 40,016) against the existing premium of Rs 6,014, left him gasping.

Sandeep's three-year old policy which came up for renewal on February 14, had started with an initial premium of Rs 9,495 in 2008-09. With no claims registered over the period, the premium dropped gradually. "I want to file a complaint against the insurer for this unreasonable hike," says Pahariya. So, what is this 'health insurance' that we are talking about? For the uninitiated it's a simple game. You walk to an insurer of your choice, select a policy and buy it. When, and if, you are hospitalised, the insurer foots the bill for your treatment as far as the policy terms provide but only after the standard one month cooling-off period after purchase.

It may not be as simple as that on the ground. Like all games having multiple players (the insurer, the insured, the hospitals and the Third Party Administrators, in this case), all wanting to win, the emotions of greed and, at times, lax refereeing, may all collude to form a heady concoction that might spoil the spirit. High renewal premiums, claim rejection (whether legitimate or otherwise), exclusions, the stringent sub-limits on room-charges and procedures, or the fine print on co-pay (the amount the insured would need to pay) lead to a high degree of heartburn and disputes.

"There are several problems plaguing the health insurance industry. One of the biggest issues that need to be tackled is the lack of transparency in dealings by insurance providers and the healthcare providers. Consumers are often left in a lurch when they need help the most, that is on hospitalisation," says S. K. Sethi, vice president, Insurance Foundation of India, who also owns an insurance distribution entity. In fact, a Public Interest Litigation filed by one Gaurang Dinesh Damani at the Bombay High Court, has sought a re-look at the industry practices, citing several instances of aggrieved health insurance policyholders. Alleging "grave wrongs", the petition claims that the "sub-optimal performance or deviation from the ideal scenario has created havoc in the lives of the people, thereby undermining their happiness."

AT A LOSS

Taking industry to task is adrenalin-pumping and most often, makes good reading. But the cases of Manpreet and Sandeep are just one side of the story. Like in all playfields there would be the ugly, the bad and the good. That is why someone like Oriental Insurance's Rao is flabbergasted at some of the industry moves.

"Insurance companies are now pricing group health right, based on their experience and exposure."
AJAY BIMBHET
MD, Royal Sundaram Alliance Insurance
So, what is it that could be prompting companies to resort to mind-numbing premium hikes and risk losing loyal customers? Insurers themselves are often at the receiving end. Rampant incidence of fraud, multiple billing, inflated bills, collusion among hospitals and patients to cheat companies, nontransparency of rates offered by hospitals, exorbitant physician and room charges, have left the health insurance industry bleeding, prompting the need for course correction. The average claims paid ratio for 2009-10 stood at 96% (Rs 96 paid as claims for each Rs 100 earned as premium). That was an improvement over 105% in 2007-08 and 103% in 2008-09.

That's an overall industry figure. There are wide variations within, and if a commercial entity is at the wrong end of the spectrum, it would be a cause for concern. Oriental Insurance has been witnessing a claims outgo in excess of 120%. Private insurers who stepped in much later have been able to better control their losses. They achieved this not just due to the lightness of the baggage, but also by being choosy and with better underwriting and claims management.

The biggest hit is on the group health covers (insuring a group, such as employees of a company under one policy). "Health portfolio, especially group health, continues to bleed most insurers because of pricing inadequacy, fierce competition from new players, and other factors such as moral hazards," says a recent report on general insurance by rating agency, ICRA.

 TRANSFER CERTIFICATE

Portability shall be applicable for all existing contracts and new contracts with effect from 1 July, 2011. There are a number of terms and conditions that will have to be considered before a policy holder moves from one company to another.

Insurers will allow credit gained by the insured for pre-existing condition(s) in terms of waiting period, when switching from one insurer to another or from one plan to another, provided the previous policy has been maintained without a break. Thus, if under a previous policy, the pre-existing condition was excluded from coverage for two years and under a new plan with a different insurer the exclusion period for the same condition is three years, the new health insurance policy can have the exclusion for one extra year. Not only this, the waiting period credit will be limited to the sum insured (including bonus) under the previous policy.

What happens if the policy results in discontinuance because of delay by the insurer in accepting the proposal? The insurer shall not treat the policy as discontinued and shall allow portability.

Also, policy contracts, promotional material like prospectus and sales literature should inform the insured that all health insurance policies are portable. Policyholders should approach another insurer, well before the renewal date to avoid any break in the policy due to delay in acceptance of the proposal by the other insurer.
PLUGGING THE GAPS

So, what are companies doing to cut losses? First, they are seeking regulatory approval for higher base premium rates (initial rates offered on policies which are revised based on claims experience or periodically). Secondly, the exposure to groups is being reduced or premigood reading. But the cases of Manpreet and Sandeep are just one side of the story. Like in all playfields there would be the ugly, the bad and the good. That is why someone like Oriental Insurance's Rao is flabbergasted at some of the industry moves.

So, what is it that could be prompting companies to resort to mind-numbing premium hikes and risk losing loyal customers? Insurers themselves are often at the receiving end. Rampant incidence of fraud, multiple billing, inflated bills, collusion among hospitals and patients to cheat companies, nontransparency of rates offered by hospitals, exorbitant physician and room charges, have left the health insurance industry bleeding, prompting the need for course correction.

The average claims paid ratio for 2009-10 stood at 96% (Rs 96 paid as claims for each Rs 100 earned as premium). That was an improvement over 105% in 2007-08 and 103% in 2008-09. That's an overall industry figure. There are wide variations within, and if a commercial entity is at the wrong end of the spectrum, it would be a cause for concern. Oriental Insurance has been witnessing a claims outgo in excess of 120%. Private insurers who stepped in much later have been able to better control their losses. They achieved this not just due to the lightness of the baggage, but also by being choosy and with better underwriting and claims management.

The biggest hit is on the group health covers (insuring a group, such as employees of a company under one policy). "Health portfolio, especially group health, continues to bleed most insurers because of pricing inadequacy, fierce competition from new players, and other factors such as moral hazards," says a recent report on general insurance by rating agency, ICRA.

PLUGGING THE GAPS

So, what are companies doing to cut losses? First, they are seeking regulatory approval for higher base premium rates (initial rates offered on policies which are revised based on claims experience or periodically). Secondly, the exposure to groups is being reduced or premiums being hiked based on the loss experience. Lastly, companies are in talks with healthcare providers for revision of rates, such as the preferred provider network (PPN) worked out by the public sector companies (Read Negotiated Settlement on page 40).

G. Srinivasan, chairman and managing director, United India Insurance, in fact, wants the regulator to allow companies more flexibility in re-pricing policies. "At present, premium rates are revised once in 5 years, on an average since regulatory approvals take a long time. "We would ideally like the repricing to happen once in two years at least, based on medical inflation," says Srinivasan. Oriental Insurance is also considering similar moves.

"The last time new retail health premium rates were filed was in 2007. I guess it is time to file new rates, supported by actuarial calculations. We are in the process of filing revised rates for the individual mediclaim policies," says R. K. Kaul, chairman and managing director, Oriental Insurance.

Private players such as Bharti AXA General Insurance Company, too, admitted they have approached the regulator. Amarnath Ananathanarayan, CEO and managing director says the revision is aimed at a gradual increase keeping the medical inflation in mind. "We have filed for a new premium hike plan with Irda. We have sought to be allowed to raise the base premium each year by a specified smaller amount rather than having a hefty hike at the end of the fifth year. The overall burden on the consumer will remain the same," he says.

"We would ideally like the re-pricing to happen once in 2 years at least, based on the medical inflation."
G. SRINIVASAN
CMD, United India Insurance
EXIT MODE

On the group side, insurers have been on an exit mode and channelising their energies to scout for more retail business. Ananthanaryanan says that Bharti AXA has virtually stopped writing fresh group policies, barring for companies that fall within the parent telecom provider, Bharti's fold. Ajay Bimbhet, managing director, Royal Sundaram Alliance Insurance, says most companies, including his, are focusing on the retail side.

"Insurance companies have started focusing on retail to drive future growth. Retail currently constitutes more than 75% of our business. Insurance companies are now pricing group health right, based on their experience and exposure. The policy scope and coverage are also being revisited," says Bimbhet. Oriental's Kaul says that he is not unduly worried if premium revision forces the insured groups to shift to another provider.

"Our losses on the group portfolio were more than 120%. We have been loading (increasing on renewal) group premiums and not bothering if business goes away," Kaul says in a matter-of-fact manner. S. A. Narayanan, MD and CEO, Iffco-Tokio General Insurance, however, feels that all is not lost on the group front, though his loss ratio on the group portfolio has been in the region of 90% against 75% on the retail front.

"We are actively pushing group policies at viable premiums which will help us in reducing losses in this segment. I would not say any product is loss-making. If the pricing is adequate and the claims management is efficient, the products need not be loss-making at all," says Narayanan.

GROWING CLIENT BASE

While some consumers may struggle in dealing with the health insurance industry and the insurers themselves have their own list of demands, more and more people are queuing up before the insurance providers, seeking health covers.

"The health portfolio has been the fastest growing segment within the general insurance space with around 40% CAGR over the past three years," says A. K. Singhal, CEO, General Insurance Public Sector Association (GIPSA) For the first three quarters of the current financial year (April 1-Dec 31, 2010), the total health insurance premium of both public and private sector companies totalled Rs 8,155 crore, compared to nearly Rs 6,000 crore during the corresponding period in the previous year, a growth of 36.2%.

Insurers say that the principal factor driving the growth has been a growing awareness of the need for a health cover in the wake of rising medical costs. "The drivers for the industry are increased awareness across all age groups of insurance as a tool to protect against future medical expenditure and, the increased cost of healthcare," says Vijay Pawar, executive director and CEO, Reliance General Insurance. Ritesh Kumar, managing director and CEO, HDFC Ergo General Insurance says that the growing incidence of life-related diseases is another reason forcing people to opt for health insurance.

"Rapidly increasing healthcare costs and higher incidence of disease is driving the growth of health insurance."
RITESH KUMAR
MD & CEO, HDFC Ergo General Insurance
"Rapidly increasing healthcare costs and higher incidence of disease due to lifestlye changes is driving the growth of health insurance," says Kumar.

ICRA estimates the health portfolio for the industry registering a CAGR in excess of 25-30% over the next five years. The share of the health portfolio has almost doubled over the last five years from 10.9% in 2005-06 to 20.8% in 2009-10.

CHALLENGE FROM LIFE

The smart growth of the general insurance industry's health portfolio may be prompting the life insurance industry to give a harder look at their health products.

Most of the health products offered by life insurance companies cover a limited number of critical illnesses and mostly benefit products where a one-time payment is made to the policyholder on diagnosis of the illness irrespective of hospital costs. However, unlike general insurance products where nothing comes back to the policyholder out of the premium paid, the health covers of life insurers provide such a facility.

"Health insurance plans by life insurers generally offer longterm tenures and fixed premium for a longer period. We offer a fixed premium for five years," says V Viswanand, director and head, product and persistency, Max New York Life. He points out that health covers contribute to about 29% of the company's total protection portfolio. Monica Agrawal, director, corporate initiatives and business development, Aviva says, "The benefits of a health offer from the life insurance stable is that they provide savings (maturity benefit, etc) and protection (life cover) components as a bundled product."

PORTABILITY WINDS

Things are likely to change for the better for everyone from July 1 should portability kick in on the assigned date. Put simply, portability would allow an aggrieved customer to kick the existing provider and switch over to the next on the same terms and conditions.

S. L. Mohan, secretary general, General Insurance Council, is confident portability would raise the industry's service standards. "Companies will have to improve their service levels or lose customers," Mohan says.

Ananthanarayanan of Bharti AXA agrees. "In the portability era, service will be the differentiator. If you move to the right company, you would get better service," says Ananthanarayanan.

"A health policy should figure in everyone's portfolio. What may be suitable for one family may not be suitable for another."
S. K. SETHI
VP, Insurance Foundation of India
But our two protagonists - Manpreet and Sandeep - are not among the lucky lot since Irda guidelines clearly say that policies must not lapse prior to porting. July 1 is too far away for both. So, what did they do with their policies? Manpreet is still scouting. "I must have a medical insurance. I will purchase a policy from another company," he says.

Sandeep is more nimble-footed. He has already tied up a deal with another private company for a similar health cover. "I chose not to allow my cover to lapse. I have paid a premium of Rs 12,616 to the new provider for a policy with the same benefits. They are recognising that I have completed my waiting periods and giving me no-claims bonus by increasing my cover to Rs 6,00,000 sum insured," says Sandeep.

So, in case you don't have a health cover, should you buy one? Lame, as they would say in modernday parlance. With high medical inflation and the uncertainties, it's a question that need not be asked, and even less, be answered. "A health policy should figure in everyone's portfolio. Given the number of providers and their offers, the permutation and combinations can be large. What may be suitable for one family may not be suitable for another. Also, the lowest price offers might not be the best-suited. So, it is better to study the market or go to an advisor," says Sethi. If you are among the 95% of the population that believes that health insurance is for someone else, you could give the issuess a rethink.

 DISCLOSE FULLY TO AVOID REJECTIONS
  • While buying health insurance consider the current cost of your (and your dependents') health and medical expenses.
  • Decide on the right cover, with policies ranging from Rs 50,000 to Rs 50 lakh. Even if you are covered by a group policy, an individual policy is advisable to ensure continuity if you leave your job.
  • Compare details, including clauses on waiting periods for pre-existing diseases. There are policies where the pre-existing diseases are not covered for 2 to 4 yrs.
  • The policy will not settle your claim up to the deductible amount. Plans with higher deductibles have lower premiums and vice versa.
  • Buy early to avoid medical tests which are usually conducted after 45 years.
  • If you provide incorrect information at the time of applying, your claims could be rejected. In order to prevent that, you should tell the health insurer about your diseases as well as your past policies.
- By Sumeet Vaid, CEO, Freedom Financial Planners

STUDY CLAIMS SETTLEMENT PAST
  • Know your needs - What are your needs? Are you planning on starting a family, do you travel abroad often, do you have an old dependent? Do you need coverage for prescriptions?
  • Study the market - Be sure to explore options before committing to any insurance policy. Remember, by comparing various companies, you may save some money and also find greater benefits. Be sure that you are comparing the same type of plans.
  • Claim settlement ratio - Always ask your insurance agent about the claim settlement history of your insurance provider as an insurance is good only if it helps you in the time of need.
  • Exclusions - Be sure to carefully read through the exclusions of the policy before committing to it although these tend to be somewhat generic. You must always see the fine print else the entire purpose of buying the policy may be defeated.
- By Rajnish Kumar, Executive VP, Fullerton Securities


HEALTH INSURANCE: WHY YOU NEED IT
1.Are you protected enough?
2.Spreading the health cover wider
3.'Health cover portability will improve industry'
4.Negotiated Settlement
5.'Standardised rates will benefit insurers, customers'
6.Extra Cover! At What Cost?
7.'Hike in health cover premium rates needed'

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