Healthy Covers

[Apollo Munich CEO]

The country’s health spend as a percentage of the gross domestic
product may be one of the lowest in the world, but the business of
health insurance is getting healthier by the day.
While countries like Canada and the US spend 17.9 % and 19% of their
total yearly budgets on health care respectively, in India it is only
34 %.

However, factors like rising income levels and a growing elderly
population are driving the growth in the industry. In addition,
changing demographics, disease profiles and the shift from chronic to
lifestyle diseases has led to increased spending on healthcare
delivery.

“The highly competitive and stressful times are definitely taking a
toll on the health of our people. The problem gets magnified among the
youth. For example, a young heart is far more damaged and suffers a
more dangerous heart attack than that of an older person,” explains Dr
Ramakant Panda, an eminent cardiac surgeon, who performed a bypass
operation on PM Manmohan Singh.

With 80% of all health expenditure borne by patients and their
families, the importance of adequate planning for health contingencies
cannot be overemphasised, especially given the steep escalation in
healthcare costs. Inflation in medical costs has been running in
double digits—higher than overall inflation—for the past four years
and is scorching the middle class and the poor alike, a survey by
global consultancy firm Towers Watson has found. Worse, the situation
is not going to get better any time soon.

The health insurance business, which has been predominantly within the
non-life sector as part of the miscellaneous accident portfolio, has
emerged as one of the most promising growth segments with increase in
not only number of products but also in the number of insurance
companies, including life insurers and stand alone health insurers,
venturing into the health insurance market.

With increasing focus on health care in the country, health insurance
in a very short span of time has emerged as the second largest
portfolio in the domestic general insurance industry. With a premium
size of almost R10,000 crore, the segment is witnessing a growth of
25% and insurers say in another two years it will be the single
biggest premium driver in quantum accretion. As far as growth rate is
concerned, it has already beaten motor business, which contributes the
largest premium income for general insurers. The health segment
contributed over 22% of the total premium in 2010-11 (21.06% in
2009-10). With increasing demand, the health insurance industry is
launching innovative products and improving the post-sales services
with a sophisticated IT back up to enable policyholder to plan
comprehensive protection against health eventualities by combining
hospitalisation indemnity products with supplementary covers or
additional policies to meet specific needs of the policyholder.

In their second round of revamping the claim services, some of the
general insurers are even offering cashless service to enable a policy
holder’s hospital bills to be settled by insurers through a
professional middle entity called Third Party Administrators (TPA)
without even involving the latter to take direct responsibility of
such services.
Two top private sector general insurers—ICICI Lombard General
Insurance and Bajaj Allianz General Insurance—have even done away with
the services of TPAs.

Bajaj Allianz General Insurance has gone for automation of cashless
management process which, the company says, has resulted in a drastic
improvement in the response time to 40 minutes as on date. The company
now directly transfers the claim amount to the insured accounts and
also provides SMS alerts to the insured at important stages in the
claims process.

One of the latest entrants in health insurance space is L&T Insurance,
which has launched a unique product to allow customers to buy a policy
till the age of 60. The policy, called Medisure Prime Insurance, can
be renewed as long as the customer survives and the premium will not
increase annually after the policy holder turns 80 years of age.

The company has chalked out a strategy to focus exclusively on the
retail segment. Y M Deosthalee, CMD, L&T Insurance, says the products
would cater to individuals rather than the corporate or group health
segments where it is a tad more difficult to make profits.
“Retail health insurance if sold carefully is a profitable
proposition,” says Deosthalee, pointing out that with the rise in the
standard of living as also in the cost of healthcare, the need for
health insurance is rapidly increasing.
“The policy provides an additional cover equivalent to the sum assured
for the treatment of a critical illness,” adds Joydeep Roy, CEO, L&T
Insurance, adding that at least 22 features have been built into the
product to address both problems of health and services.

The largest private sector general insurance company, ICICI Lombard
General Insurance company, has seen a good response for one of its
products called Secure Mind. It is basically a packaged and benefit
product, which is offered with loans availed by customers from
financial institutions and serves as a financial protection to them
along with the benefits of a health insurance product. The product
provides the coverage for nine major medical illnesses and procedures
like cancer, end-stage renal failure, multiple sclerosis, major organ
transplant, heart valve replacement, coronary artery bypass graft,
stroke, paralysis, myocardial infraction and death and permanent total
disability due to accidents and loss of job.

This product is a benefit product where the sum insured is paid as a
lump sum. For the loss of job cover, the company pays three EMIs. For
a person aged 37 years, with the insured sum of R25 lakh and a tenure
of five years, the premium for Secure Mind works out to R75,250.

“The product is a win-win proposition for the customer and the
financial institution. In the event of the claim, we pay the lender
whereby the customer is relieved of the loan and the FI’s loan book is
also secured,” says Sanjay Datta, head, customer service, health and
motor, ICICI Lombard General Insurance.

Similarly, Antony Jacob, CEO, Apollo Munich Health Insurance, says his
company’s policies promise to refrain from loading any customer at the
time of renewal in case of a claim or even worsening of his/her health
condition after taking the policy.

“We believe loading applied on an individual customer due to claims is
unfair as it would make it all the more difficult for the customer to
continue his cover (due to the high cost added to the premium) at a
time when he is more likely to be hospitalised or has taken ill.

Also, Apollo Munich’s policies offer 100% lifelong renewal, without
any co-payment or sub-limit options, regardless of the size or nature
of claim made during the tenure of the insured period or due to any
change in the member’s health status after he or she joins. “This is a
unique feature that Apollo Munich has offered for the first time in
the marketplace,” says Jacob.

Unlike most plans available in the market, Apollo Munich also extends
cover for expenses related to dental and optical care as an added
benefit within its Easy Health plan for certain variants.

Regulatory Initiatives

The segment regulator IRDA has been consistently attempting to address
and resolve the key issues faced by health insurance sector. One of
the initiatives has been the creation of a checklist for facilitating
processing of health insurance products filed by non-life insurance
companies. The checklist is created by analysing the observations of
the health section over the last two years, across various categories
of health products.
The checklist is intended for self-administration by companies for
products filed by them so that the inconsistencies are eliminated at
their end before the documents are submitted to IRDA. Based on the
checklist and as a step towards creating an online library of
products, the health section has designed a product database that
would capture all important features of health products to the
granularity of sub-limits, age-wise premium rates and exclusions.

In addition, once the software is put into place and the data keyed in
for health products, the product database will enable IRDA to perform
comparative analysis across all health products, says J Hari Narayan,
chairman, IRDA.

All these initiatives are set to be introduced in due course and also
online filing of health insurance products by insurance companies.

While processing health products under the existing file and use (F&U)
formats, health section has recognised the need for more health
specific information from insurance companies at the time of filing of
products. Taking cognisance of this and with a view to enhance the
health product processing, the health section has re-designed File &
Use formats (where insurers have to first get approval for the
products from the insurance regulator) for filing of health insurance
products.
Hari Naryan explains, “While insisting on the sustainability and
viability of the products with respect to the rates and discounts
filed under File & Use procedures, the authority also requires the
insurance companies to submit their past experience on similar
products and their analysis to support the price mechanism filed by
them.” He adds, “As more people buy health insurance to meet the
requirement of funding health care for themselves and their families,
the necessity of a close monitoring of the pricing mechanism of health
products by the insurance regulator becomes important.”

Health Insurance Portability

Further, insurers expect health insurance portability (HIP), which
came into force on October 1, to be a game changer in domestic health
insurance industry. According to general insurers, health insurance
portability, though more complex than mobile number portability, is
likely to see a greater response.
Neeraj Basur, CFO, Max Bupa Health Insurance, says, “The industry is
likely to witness some migration as HIP allows policyholders, locked
in their existing health insurance policies, to evaluate other
options, without fearing the loss of benefits for the waiting period
served with their existing insurer.”

Jacob, on the other hand, maintains the move will raise service
standards and see increased competition among insurers to retain their
existing customers. “The regulation is expected to bring in new
benchmarks in terms of service standards and delivery mechanisms for
insurance players. In the long-run, a company with better services
will gain the trust of customers,’’ says Jacob.

Datta of ICICI Lombard General Insurance says that a common data
sharing platform will help all insurers access information pertaining
to portability. However what will decide the fate of the health
insurance business is customer satisfaction from the services point of
view,” says GV Rao, a former CMD of state owned Oriental Insurance.

At present customer dissatisfaction is really rampant despite tall
claims by insurers. Insurance regulator has an important role to play
and its timely intervention can assure customers and help the business
to grow,” adds Rao.

It's bound to happen sooner than later because health insurance
provides a common platform for all segments of health care providers
like hospitals, doctors, pharmacists and above all insurers, and it's
in their interest to transform the health care industry keeping in
view the rising customer expectations.