Renewal woes

Everyone is in favour of health insurance. With medical costs going up rapidly, the common man knows that insurance is the only way to get quality treatment without paying a bomb.

     Print Edition: December 27, 2007

Everyone is in favour of health insurance. With medical costs going up rapidly, the common man knows that insurance is the only way to get quality treatment without paying a bomb. Insurance companies know the value of promoting health insurance covers. Hospitals find that medical insurance helps streamline operational processes. So, if everyone loves it, why then is there such a fuss being made about the “problems” of health insurance?

The answer lies in one word: renewals. For an insurance company, you are a good customer as long as you do not file a claim. The minute you raise a claim, the company treats you as a person with more than standard risk. And you can be denied cover if you are seen as a bad risk or as a potential risk. However, the Insurance Regulatory and Development Authority (Irda) has stepped in to ensure that nobody is denied cover, particularly existing customers.

Renewal cannot be denied, but the insurance company can re-price cover
Policies that need renewal only after 15-20 years may be introduced
Risk-based premium to come into play
Clarity on pre-existing diseases
Long-term insurability to be introduced

What insurance companies now do is to take advantage of a loophole in Irda’s rule. Instead of denying renewal benefits, they simply re-price the cover, often at a good 100-200% above the last paid premium. This is bad news for anyone who has made a claim and wants to renew the policy. But it’s worse for the aged. If you are over 50 and have a good, claim-free record, you will expect some benefits for being a low-risk loyal customer.

But, for the insurance firm, you are likely to become a bad risk, since your chances of making a claim increase with age—especially if you haven’t raised a claim this far. This means that the renewal rate will be so exorbitant that you’d rather forego insurance. The good news is that the General Insurance Council, the representative body of general insurance companies, is working on a set of guidelines that will ensure easy renewal of health insurance policies, no matter at what age.

It is expected that health insurance will become a long-term contract, with the company agreeing to insure an individual for 15-20 years before he needs to renew it. There will also be a limit on escalating the premium on renewal after claims are made. This means that insurance firms can no longer increase premiums on a case-to-case basis. If these guidelines do see the light of day, they should be reason enough for policyholders to celebrate, even in ill health.

— Narayan Krishnamurthy



Employers in India are optimistic about hiring prospects in the January-March 2008 quarter, according to the Manpower Employment Outlook Survey. Manpower, a firm listed on the New York Stock Exchange, is a leading player in the employment services industry. The survey results reflect global trends in job creation.

Finance, insurance, real estate42
Mining and construction49
Public administration/education38
Transportation and utilities40
Wholesale and retail trade41
Figures are percentage change in Jan-Mar 2008 over Oct-Dec 2007

Of the 5,163 employers surveyed in India, 43% expect an increase in staffing levels, 1% a decrease and 45% anticipate no change, compared to the October-December 2007 quarter. India’s “net employment outlook” (subtracting the percentage anticipating a decrease from the percentage expecting an increase) stands at +42%.

The strongest outlook was seen in sectors like mining and construction sector (+49%), services (+45%), and finance, insurance and real estate (+42%). Hiring intentions were weaker in the manufacturing, and public administration and education sectors (both +38%).

Globally, Argentina, Costa Rica, Hong Kong, India and Peru expect stronger hiring plans while Ireland is the least optimistic.



You’ll have to start keeping score from now on if you want to get a decent interest rate on your loans. Or if you want to move from one lender to another. We are talking of your credit score, soon to become the best indicator of your credit-worthiness.

The Credit Information Bureau India in association with TransUnion (a global player in credit and information management) has formulated a system to assign a credit score to every borrower on the basis of his loan repayment history, outstanding debt, credit limit used and more.

Depending on your credit history, you will be assigned a score of 300 to 900, the higher the better. “The score will predict the likelihood of a customer becoming a defaulter in more than 91 days on one or more lines of credit, including credit cards and loans,” says Cibil chairman S Santhanakrishnan. Individuals won’t have access to it but if they have any doubts about their score, they can approach Cibil.

— Rakesh Rai

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