The Hindu Business Line : Health insurance: A revised and enlarged menu

Health insurance in India has traditionally been associated with one name – “Mediclaim”. Though many of us don’t realise it — Mediclaim is actually a brand name, which acquired the status of a generic product category — much like Dalda (which was till recently the generic name for Vanaspati) or Vicks in their time. This was possible because for 13 long years, Mediclaim was the only product in its category. There were four PSU insurers offering health (read: ‘hospitalisation’) insurance schemes, all of which were identical and carried the same brand name.

With the liberalisation of the sector in 2000, more schemes were launched by various private insurers and Mediclaim is no longer a monopoly. But, health insurance till recently, remained the exclusive bastion of non-life insurance companies (with life insurers traditionally focusing on critical illness covers).

However, things have changed. Life insurers have started launching stand-alone health insurance policies now. What began as a trickle, with Bajaj’s Health Care in 2005, is now spreading like a rash. ICICI-Prudential (Hospital Care), LIC (health plus), Reliance (Health + Wealth) and Max New York (Medicash) have all joined the health band wagon. As a result, we now have a choice of over 16 different basic health insurance schemes (not counting their variants).

Choice and confusion

There are the obvious questions which pop up in a consumer’s mind. Is the health plus/hospital care a direct competitor (substitute) for mediclaim and its variants? If not, what are the major differences? Should I, as an individual buyer of health insurance, discontinue my mediclaim policy and shift to the ones being offered by life companies? There is, therefore, a need to understand the conceptual differences between these 2 product categories (comparing specific schemes would be beyond the scope of this column) so that we can make informed choices.

Non-life health schemes would only compensate you for the expense actually incurred, whereas life-health schemes would give you the lump sum amount specified in the policy irrespective of your actual spend (conditions apply for both, please!!). For example, a surgery performed for free by a surgeon (for whatever reason) would still qualify for full benefit under a life-scheme, whereas a non-life scheme would not pay anything at all.

Investment options

Non-life schemes are one-year policies, whereas life-schemes are long-term policies. What does this mean to you as a consumer? Have you heard of people being refused a renewal under mediclaim because there was a cardiac by-pass surgery and a heavy claim last year? Well, that won’t be the case with a life-scheme (premium could vary year-to-year in both, however!). Life schemes provide for daily cash expenses — which is again pre-fixed and has no link with actual expenses. Non-life schemes have no separate provision for this.

Non-life schemes cover most forms of hospitalisation, whereas the lump sum benefit under the life schemes are normally meant only for a specified list of diseases/surgeries. For example, a sudden outbreak of dengue fever or typhoid would be payable under the former, but would only get paid under the hospital cash section in the latter. Life schemes come bundled with investment options (unit linked plans), which non-life schemes can never have, although it is better not to get carried away by this feature.

The amount you pay is anyway split into two by the insurer — the health premium component and the investment component. Having understood the conceptual differences, let us now get down to the real question. Are they substitutes? Can I spend all my ‘premium-rupee’ on any one and ignore the other?

The answer seems to be – No!

Ifs and buts

Although these two products would compete for a share of your ‘premium budget’ — they cannot be considered direct substitutes. As can be seen from the points above, they serve different sets of financial (& emotional) needs of the consumer (non-life health plans give you complete protection against all types of hospitalisation, but come with an one-year tag and a lot of paperwork.

Life health plans give you limited protection, but with a long-term tag and minimum fuss.)

Therefore, in reality, they are not substitutes — they are actually complementary. So what’s the verdict?

For complete peace of mind - take both! (I guess life never gives us easy choices anyway!)

(The writer is Chairman, India Insure Risk Management & Insurance Broking Services. The views expressed are his own and not that of the organisation. )

More Stories on : General Insurance | Health | Investments

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page