Banking On Cover

Health plans offered by banks to their customers work well for individuals with high risk.
Chandralekha Mukerji        Print Edition: October 2013
Banking On Cover

Insurance from banks on offer for account holders might be the economic option for those who have to pay higher than normal for a health plan. This includes those who have a pre-existing condition, fall in the higher age bracket or miss having the benefits of an employer's group health plan.

Banks have tied up with insurers, usually public sector general insurers, to offer health insurance plans with low premiums compared with indemnity plans (just like group health insurance plans).

For example, SyndArogya, a tieup between Syndicate Bank and United India Insurance, charges the same premium for a 30 year old and a 60 year old for the same cover. Or consider a mediclaim policy from National Insurance. It would cost a 55 year old Rs 9,672 annually. But, the family floater Baroda Health Policy, a tie-up of Bank of Baroda with National Insurance, for spouse and two children will cost only Rs 4,213.

"As the bank promises large business to insurers, they devise a product that is better than the retail product in their own portfolio," says Sudhir Sarnobat, CEO, Medimanage Insurance Broking, a Mumbai-based health insurance brokerage firm.

Further, there are usually no medical check-ups and the entry age is up to 65 years with no increase in cost. All this makes it an attractive product for those with pre-existing conditions or fall in the higher age bracket.

The tie-up also ensures that the insurer will respond to your enquiry for a health plan. Often, high-risk individuals do not get a reply from insurers. "Since the forms are submitted through the bank, a response has to be officially conveyed and, so, even people with diabetes or hypertension might get approved," says Harsh Roongta, CEO, Apnapaisa.com.

Some such plans are even better than other retail products on offer. For instance, the Baroda Health Policy has no sublimit (on room rent, doctor's fee and so on), no co-payment (high risk plans often have insurers and customers sharing treatment costs), a fixed premium for up to 65 years and a 25% increase in premium after 65.

Some, such as SyndArogya, even cover parents at a lucrative rate. A Rs-5 lakh cover for a family of six-proposer, spouse, two dependent children and parents-would cost Rs 12,167 annually. This is one-fourth of what a retail product with similar benefits would cost.

There are add-on features available as well. Among others, the cost of health check-up (up to 1% of the sum insured) is covered after three claim-free years. Pre-hospitalisation and post-hospitalisation expenses are covered for first 30 days and 60 days, respectively. You also get ambulance charges cover up to Rs 1,000, while some cover maternity benefits (up to 5% of sum insured) from the second year.

The claim settlement is carried out directly between the customer and the insurer. Rates, and more importantly terms, are pre-negotiated and, so, normally excellent.

Since this is a direct contract between the policyholder and insurer, you get regular tax benefits under Section 80D of the I-T Act. "These are bulk deals and not a group policy and, so, each account holder gets a policy document, not a policy certificate," says Roongta.


THE DRAWBACKS

One major shortcoming is the age at which renewal stops, usually 80 years. In comparison, most indemnity plans offer lifelong coverage. However, this might change as the new guidelines have made renewal mandatory for all heath plans.

Also, the maximum coverage you can get is Rs 5 lakh, which might be very low considering current medical costs. "It is advisable not to buy any insurance plan that does not offer lifetime coverage and adequate cover," says Yashish Dahiya, CEO, Policybazaar.com.

Apart from the regular exclusions and a 3-year claims-free waiting period on pre-existing illnesses, some plans also don't cover primary diagnostic treatment charges.

Moreover, though the policy is approved through the bank, the claims settlement process will be done through a TPA or the insurer.

There is also the risk of discontinuance of the partnership. Since the product is designed for the customers of a partner bank, the plan will likely be withdrawn.

Sarnobat explains: "In such cases, the policies will continue till the date of expiry. On expiry, like group insurance plans, the customer will be given the option to port to a similar plan being offered by the insurer."

While continuity benefits would be offered under standard portability guidelines, there will be no guarantee on pricing and there may be changes in policy benefits.

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