The Hindu Business Line : Life, health and the right cover

Ensuring efficient ‘supply chain management’ across various stakeholders of the medical industry plays a vital role in settling health insurance claims.

S. Jayaprakash

In the last month or so, there have been many new health insurance plans offered by life insurance companies such as LIC, Max New York Life, IDBI Fortis, Reliance Life, and so on.

Though health insurance has its own values, this article analyses the rationale behind the strategy of life insurance companies entering the health insurance market and how this can benefit the industry, in general, and customers, in particular.

The main benefits of the plans promoted by life insurance companies are more in the nature of allowance. Strictly speaking, these allowances are supplemental to core health insurance and not a substitute. While mediclaim policies cover reimbursement of expenses incurred during hospitalisation, allowance policies provide specific benefits based on the defined contribution levels, as stipulated in the policy

The aim of the allowance type of policies is as described below.

Insurance sales in India are more often associated with income-tax rebates than any other benefit. With the list of investment products under Section 80 (C ) being increased, for e.g. the earlier limit of Rs 20,000 maximum on housing loan principal repayment has been replaced with a maximum of Rs 1,00,000. This leaves many people in the organised sector with enough money to invest in other products that can fetch them good savings and coverage.

For certain age groups and profiles, even if a person wishes to take health insurance, he/she may not be able to exhaust the Rs 15,000 limit. For instance, the lowest individual mediclaim premium for a person aged 40 is around Rs 5,000, which means that another Rs 10,000 is left for spending under health insurance.

The customer will be out of office during hospitalisation and there are chances that he will incur loss of pay. The allowances are expected to offset his loss of income.

Reimbursement

None of the reimbursement health insurance policies will be able to help the customer to meet 100 per cent of the expenses incurred in the hospital at all times. For instance, definitely the expenses on food, visitor charges, etc., are not covered by the policies. The allowances should be helpful to meet such needs.

If the plans offered by life insurance companies are of reimbursement type, then, according to contribution clause, the claims need to be shared. To illustrate, If a person has two policies with Company A and Company B, then a claim of Rs 10,000 should be shared among Companies A & B, according to the customer’s contribution level. This is to avoid the customer claiming twice and profiting from the insurance.

Interestingly, life companies offer only defined benefit plans of allowance nature and though a person may hold two policies of allowance nature from two different companies, this need not be shared, as it is only allowance. This also paves way for more companies participating in the business.

It was a long-time demand of the public that health insurance policies too should offer return on investments. Some of the companies have started floating plans with unit-linked plans. To make the investment return more attractive, it is time the insurance industry thought about reducing fund management charges for such plans and also investing more in health-care sector equities and thematic funds that indirectly benefit the health insurance industry.

Comparison

There are around 75 health insurance products offered in the market by life, non-life and stand-alone health insurers. One cannot directly compare the allowance benefit plans of life companies with other health insurance plans offered by existing health insurance and non-life companies as these plans fall in a different league (though comparison in premium rates can be made with the allowance benefit plans offered by non-life companies where the benefits also match).

One cannot also compare the risk premium part of a particular benefit of one plan — say, hospital cash benefit — with a similar benefit of a plan offered by health insurance companies as the objective of each plan is different and a lot of cross-subsidisation factors are taken into account while packaging a featured health insurance product. So, the best way to decide which is best plan is by evaluating the benefits offered by the plan vis-À-vis an individual’s health-care needs.

As life insurance companies always enjoy the luxury of a greater public interface when compared to non-life companies, there is considerable scope for the exponential growth of the health insurance industry in the near future. So, the chances are that the public will get exposed to either a reimbursement plan or a supplemental plan, or both, which makes the probability of success higher. The critical factors, however, do not lie in the benefits of one plan or the other, but with the companies and their ability to make the plans a success. Factors such as proper training, alternative marketing channels and supply chain need to be taken into account and worked on to make any plan a success.

Education and Training

It is generally observed that the agents of life insurance companies often lack the ability to understand the finer aspects of the products they sell, leading to the attrition of customers in the form of lapses, surrenders, and so on.

Looking at the health plus policy features and conditions, there are possibilities of more misunderstandings among the stakeholders as agents scramble to meet targets before the end of financial year and clients are concerned with tax concessions.

It should also be understood that agents are the contact points for any assistance required for the customer and are expected to be responsible and sensitive, and available for follow-up information at all times, not only until the policy is sold!

Life insurance companies should not bank only upon existing channels to promote their plans. They can also try out alternative channels such as hospitals, airlines, etc.

Unlike the earlier products launched, where the product features, according to the customer expectations of the time, were more related to financial matters alone, health insurance plans are more about the emotional, sentimental and medical needs of the people. The agents should properly educate the people to still go with another health insurance policy for wider coverage and benefits and be frank and clear about the plus points as well as the limitations of the policy they are selling.

Handling claims

Each claim is likely to be a new experience for the employees who handle health insurance policies (though, to some extent, it may follow the lines of critical illness benefit). Hence, ensuring ‘supply chain management’ in terms of relationships with various stakeholders of the medical industry plays a vital role. Insurance companies have several stories about the kinds of problems that crop up in the claims process.

In summary, the health insurance segment, though holding high potential for growth, is still exploring uncharted territory. But, given the current trends, the sector is expected to generate around Rs 180 billion premium income by 2012. Perhaps the time is right for life insurance companies offering health cover to invest in the stock market and indirectly transform the country’s medical infrastructure.

(The author is a Chennai-based writer. E-mail: dr.sjayaprakash21@gmail.com)

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