Insurance Article, The Insurance Times 2021, The Insurance Times May 2021

HOW HEALTH INSURANCE IS BECOMING A PRODUCT FOR ALL SEASONS

India is among the 15 worst COVID-19 affected economies. COVID-19 which began as a health crisis has now taken over as a financial one. With the global economy crashing and multiple sectors taking a major financial hit, the insurance industry has become a vital part of the new reality of the economy.

Since General Insurance undertakes the valuation of assets and businesses as well as their overall economic activity, it is benchmarked with the GDP of a country to measure the insurance penetration. Hence, a large proportion of the General Insurance sector is dependent on the performances of industries and individual businesses.

So with the lockdown causing a hitch in the business sector, the General Insurance market has subsequently suffered. The overall sector is believed to look up as the global economy stabilizes by 2022. The insurance industry rides on the back of other industries.

Hence, unless the overall economy bounces back or the insurance industry finds business in hitherto uncovered areas, the industry is likely to struggle in maintaining its momentum. The COVID-19 crisis has given rise to both immediate and potential challenges for the insurance industry in near future.

The COVID-19 pandemic has been a game-changer for the Indian life industry as it has managed to reinvent itself quickly by adopting digital processes in all its operational areas. The pandemic has reminded everyone of how vulnerable they are and the need for people to adjust and adapt to the way they work and do things.

The market has seen a proliferation and adoption of new technology over a short period of time. Technology that the industry was planning to adapt over the next five years has been implemented in a few months’ time. The market was seeing a rapid increase in the acceptance of digital payments, including by the older generation.

 

India traditionally has been an underinsured country when it comes to Health Insurance. However, with Government initiatives such as Ayushman Bharat which aims to insure the poor and vulnerable, the gap has somewhat been bridged but the Private Insurance Schemes have reported covering only 18% of the urban population and a little over14% of the rural population.

While the demand for health insurance is expected to increase considerably, underwriting thresholds may also go up and thus the negative movement may not be offset.

With the constant increase in the number of cases and the prolonged duration of the crisis, the IRDAI has mandated all general and health insurers to start offering Corona Kavach – an indemnity based health plan and Corona Rakshak – a fixed benefit health insurance – policies to their customers.

These policies are meant for covering hospital and medical expenses of COVID 19 patients. Traditionally, the insurance industry has been employee-centric. With the advent of digital disruption of the industry, there will be an impact on its vast employee bases in the foreseeable future.

However, despite the switch to digital mode, a vast majority of the business requires one-on-one communication or face-to-face interactions. As a result, companies need to ensure that their agents have access not only to safety equipment in the office but also required data and applications to safely work from home.

A different roadmap for growth

Remaining relevant through the digital transformation trends in insurance and demanding customers is a major challenge for the sector. The pandemic has changed the income and investment landscapes dramatically over the past nine months, forcing investors to rejig their financial portfolio for long-term security.

Investors’ preference for insurance, savings and the size of emergency funds have gone up, while building a corpus for wedding expenses has come down the priority list. The Covid-19 pandemic has turned the spotlight on the health insurance market in India.

Out of pocket expenditure on health in India is as high as 64%, whereas, in developed countries, this figure is less than 20%. At present, health insurance is as low as 0.29% of GDP. Ayushman Bharat has provided health insurance to households below the poverty line.

But, the middle class remains largely uncovered. Design of simple and need-based products, using simple wording to describe terms and conditions, and quick claim settlement are the key areas for the insurers to concentrate on.  To cater to the current requirement, IRDAI came out with two standard corona products, Corona Kavach and Corona Rakshak.

Along with other corona specific products, the insurers have been able to cover more than 120 lakh lives against Covid-19 till the end of October 2020. IRDAI has also mandated a simple, inclusive standard comprehensive health insurance product called “Arogya Sanjeevani” to be sold by all general and health insurers.

This is helping customers to opt for appropriate health insurance without getting confused on varying terms and conditions. Insurers are also encouraging insurers to offer stand-alone products against vector-borne diseases like dengue, chikungunya, malaria and encephalitis.

 

New world, new customers, new solutions

Customer needs and expectations are changing, and they will continue to do so, possibly at an even more rapid pace. Those that view this as an opportunity to combine insurance and technology by providing new and innovative products, services and delivery channels will be the winners in what will be a different market in years to come.

Customers are the disruptive force in the insurance industry. It will be crucial for insurers to leverage digital capabilities to deliver a superior customer experience. Insurers must establish online direct-to-customer channels to facilitate insurance purchase, policy administration and claims.

Further, empowering agents, brokers and bancassurance partners with technology tools to enable digital-assisted sales will improve productivity and customer experience, and support remote customer contact. The hybrid working model has been adopted by insurers and the pandemic has shown that remote working is here to stay.

With the massive shift to work from home, distributed work environments are rapidly becoming the new norm. The pandemic has thrown light on the life and health insurance to the masses. Insurance has today moved from a push product to a nudge product.

Standard health insurance product

The general and health insurers can offer one or a combination of diseases and can price a policy for every disease separately. The minimum sum insured is Rs 10,000, while customers can opt for a cover in the multiples of Rs.10,000, up to Rs.2 lakh.

The policies, which can be offered on a family floater basis as well, will have a waiting period of 15 days and the premiums will be same pan India. A standard insurance product means that the coverage details for a particular policy is uniform across all insurers.

Other standardized products include Corona Kavach and Rakshak for Covid-19, Arogya Sanjeevani, which is a health plan, and Saral Jeevan, a term insurance policy. Life insurers have been mandated by IRDAI to launch Saral Jeevan products by 1 January 2021.

“Standardization helps set a baseline for insurers. At the first level, this will ensure the availability of specific-purpose plans. Next, insurers can innovate on product design to differentiate and provide more options to policyholders. However, it will not be mandatory for insurers to launch standard policies for vector-borne diseases.

Digital disruption – practical not theoretical

Technological change is a given. But knowing about it and acting on it are very different propositions. Disruption from new technologies is a given. It wends its way through all other trends. But acknowledging it and acting on it are very different propositions.

Insurance companies need to know how to deploy the right technology for the right purpose or they risk being left behind. Rapid advances across a whole range of technologies are enabling industries to do more for their customers – and to do it faster and cheaper.

Financial services, in particular, are seeing significant disruption; however, there is confidence in the industry as the majority believes that the industry is moving fast enough to keep up with future technology trends. Along with this advanced analytics is expected to increase over the next three years.

Despite this compliance will become more of a challenge when adjusting to digital disruption. Digital adoption over the past nine months has worked in its favour as the company, through the use of analytics, is now able to sell the right product to the right customer.

The COVID-19 pandemic has resulted in a huge boost for digital transformation across the insurance industry and this is here to stay. The insurers have equipped the underwriting and fraud prevention teams with digital technologies for “faster and efficient” settlement of claims.

 

The negotiating table beckons

In a highly competitive environment, executives acknowledge that organic growth will not be enough.  Incumbent firms can no longer rely on organic growth or internal innovation. The winners will be those that can forge alliances with innovative start-ups; ally with InsurTech; and consolidate with their peers.

A rapidly changing industry will require unprecedented deal-making skills. Poorly integrated businesses fail to achieve expected synergies and are at least in part responsible for the complex organizational and technological structures in place that are currently holding back many insurers’ attempts to keep up with more nimble competitors.

Integration success requires detailed planning ahead of the deal closing and swift action thereafter. This comparative table comprises statistics on the insurance industry indicators as this sector is a key component of the economy by virtue of the amount of premiums it collects, the scale of its investment and the essential social and economic role it plays on personal and business risk coverage.

This dataset includes insurance activity indicators such as market share, density, penetration, life insurance share, premiums per employee, retention ratio, ratio of reinsurance accepted, market share of foreign companies and market share of branches/agencies.

Health insurance for diabetics:

When doctors write prescriptions for diabetic patients, recommendation for health insurance becomes an important element of it. However, for diabetic patients getting a health policy is not a simple affair, especially for those at an acute stage of it.

Star Health and Allied Insurance created Star Diabetes Safe health insurance policy around seven years ago. First time in India, patients who were already on insulin had a diabetes policy without premium loading or flurry of questions, as happens otherwise.

While comprehensive policies also cover diabetes in India, they come with a long waiting period (up to four years) and may not be available to a patient during an acute phase of it. These people can go for diabetic specific plans. However, such plans may have at least a 25-30 per cent premium differential with the comprehensive plan.

Besides, not many options are available. Popular ones include Care Freedom for Diabetes from Care Health Insurance, Diabetes Safe Plan from Star Health Insurance and Activ Health Enhance (Diabetes) from Aditya Birla Capital. Star Health policy comes in two variants of Plan A and Plan B.

Under the Plan A variant, the insured person needs to undergo a pre-acceptance medical screening, while no such thing is required in Plan B. Diabetes Safe plan can be bought by any diabetic between 18 and 65 years.  Star Health policy covers other diseases as well such as prostate problem, gall stone, and cataract etc.

However, the waiting period for the same could be longer than that for diabetes. In addition, insurance policies usually cover only type-2 diabetes. Star Health provides coverage for type-1 diabetes as well. Care Freedom for Diabetes also offers coverage without any pre-policy medical check-ups.

Enrollment under the plan is applicable to individuals with multiple morbidities, or health complications such as hypertension, lipid, and obesity. Active Health Enhance (Diabetes) also covers type-2 diabetes along with type-1, but pre-policy medical check-up is also required.

Steeper increase in premium:

With multiple factors coming into play, the COVID-19 pandemic being one of them, health insurance premiums have jumped up to 100 per cent this year. Premiums have jumped by 10-15 per cent for the middle age group, on an average.

However, the insurance premiums have seen a steeper increase in the case of senior citizens. Premiums have increased by as much as 100 per cent in some companies in higher age groups. For client age above 55-66 years, the premium has doubled. For example, if in 2019-20, the premium was Rs. 28,000 for 2 persons, clients have received the renewal notice for Rs. 55,000-60,000, this year.

Premiums on an average have risen by 25-35 per cent this year as against an increase of less than 10 per cent last year. However, for some age groups, especially in the older ones, premiums on an average have increased by 50-75 per cent.

There are multiple reasons for this rise – the COVID-19 outbreak that has also caused medical inflation, government-induced coverage expansion and change in price slabs, industry experts claimed.  Insurance companies had received Covid-19 claims to the tune of Rs. 8,000 crore and they had settled Rs. 3,500 crore worth of claims.

Increasing premiums is the only option for insurers. However, the increase in premium was anyway due for few insurance companies.

IRDAI has increased coverage under the health insurance policies and this has seen an increase in the health insurance premiums by around 5 per cent. COVID-19 might not have a major role to play in price hike as the extent of the premium increases depends on age, coverage and sum insured.

People usually select a health insurance plan based on its annual premium. However, the premium is not the only thing you should focus on while selecting a policy. It’s equally important to consider factors like the plan’s network of hospitals, exclusions and sub-limits, medical checkups, waiting periods for pre-existing conditions, pre and post hospitalization cash and no-claim bonus facilities, etc. and the insurer’s claim settlement ratio and the ease of settling claims.

Here are the annual premiums for Rs. 5-lakh individual policies currently being offered by 20 top insurers in the country. Do note these premiums are for basic coverage for a 30-year-old male living in a metro city. Your actual premiums could be different as it would be determined based on the age of the insured, health condition, place of residence, type of cover, add-ons, so on and so.

Gifting health insurance:

Getting expensive gifts and ornaments are surely enticing for everyone, however, securing one’s family’s health and future should be of utmost importance. Health is one of the most important aspects of life, whether it is for self, spouse, or the entire family.

The health of one single person getting affected in the family disrupts peace and happiness of all other family members. To add to it, COVID-19 has taught each one of us the true value of life and significance of securing a family’s health.

If you want to include immediate family members like parents, wife, children, and other dependants, then a family floater plan is the best gift. This type of plan offers coverage to family members at a single premium instead of multiple individual premiums.

One has to note that, while family floater will give one the advantage of covering his whole family at a low premium and larger sum assured, the premium will typically depend upon the oldest member of the family. A higher premium needs to be paid in that case.

If the family floater is for the husband, wife and no children, a lower premium will work as are all young and healthy.  Maternity Health Insurance   is one gift which can be specifically gifted to the wife. For newly married couples, who would sooner or later plan for a family, this can be a perfect investment.

The plan covers expenses such as pre-natal, post-natal, delivery charges and charges of the ambulance. Not just that, the plan also covers charges of infertility and offers coverage. A health insurance policy should not be treated as an option but a necessity in today’s life.

Health problems have intensified due to the changing lifestyles of people across the world. One wave of COVID-19 has proved, how critical, health emergency can be and why we need to keep ourselves prepared for the worst times. Hence, a well-thought-out insurance policy can be one of the most effective gifts.

 

GST on health insurance:

Health and finance experts argue that medical insurance has emerged one of the basic products during the pandemic and government should not make money out of people miseries. India, being a welfare state, should provide affordable healthcare especially in these unprecedented times of pandemic as part of the fundamental right to life guaranteed under Article 21 of the Constitution of India.

Clearly, these are not the times for the government to tax or earn revenue from public health. Rather it is the time to subsidize the life-saving measures be it healthcare or the health cover.  The reducing GST makes sense as only luxury and non-essential products attract 18 per cent GST.

Even if the government is concerned about the loss of revenue due to decrease in GST rate, on the contrary, bringing health insurance in lower tax bracket might benefit the government by the way of enhanced penetration. As in developed countries, governments provide health insurance to its citizen, the least government in India should do is to put it under the lowest tax bracket.

The implication of levying 18 GST on health insurance ought to be evident from these figures given the fact that the private health sector is now the major player in dispensing both the inpatient and outpatient health care.

 

In the six-month period from April to September 2020, health insurance became the most valuable segment for non-life insurers in terms of premiums collected, leapfrogging motor insurance. This is happening for the first time since the industry was thrown open to private players about 20 years ago.

Health insurance accounted for 29.7% of premiums collected by non-life insurers in the first half (April to September) of 2020-21. Motor insurance came in a close second, with 29% of premiums. In 2014-15, the share of health was 23.4% and motor 44.4%.

Historically, health premiums have been driven by ‘group policies’ or organizations buying an umbrella cover for their employees. In the post-pandemic phase, the momentum came from individuals buying policies. Premiums paid on individual policies increased by 34% in the Apr-Sep period compared to the year-ago period, against 16% on group policies.

As a result, the share of individual policies in the health premium pie increased from 36% to 41%. Premiums in the government segment fell and the overseas segment was virtually decimated. As per the latest data from GIC, nearly 4.45 lakh claims worth Rs. 6,836 crore have been claimed on account of corona virus, of which insurers have settled just 3.02 lakh claims worth Rs. 2,914 crore as of October 20.

As on 13 November, PM-JAY had issued 126 million e-cards to individuals. Even if one assumes all these 126 million individuals did not have any health cover previously, that still leaves about 1 billion Indians uninsured. While PM-JAY is a step in the right direction, its selection criteria is stringent, based on data from the Socio-Economic Caste Census (2011), restricting eligibility.

Large sections of vulnerable populations, especially migrants, are still unable to access health insurance. Any income shock from hospitalization can plunge them into poverty. A significant expansion of health insurance is necessary to provide a safety net to vulnerable households. For a business that thrives on medical uncertainty, the covid-19 pandemic has provided a shot in the arm for the health insurance industry in India.

 

The customer acceptance of technology needs to be retained even after the pandemic. Post COVID-19 the financial and medical underwriting of life and health insurance in India is likely to become tighter with some restrictions in place.

Medical check-ups may be mandatory to ensure that none of the vital organs is impacted. COVID-19 could have long-term effects and clarity is still required over its post-illness impacts. A new COVID-19 questionnaire has also been introduced as an additional piece of documentation for life insurance buyers. Insurers will want to do fully-fledged medical check-ups.

In terms of financial criteria, earlier, for lower sums assured, companies relied on self-declaration of income. Now, they would want to see income proofs. It has become one of those dreaded diseases because of the unpredictability.

So, if a person has had COVID-19, it would be prudent on the part of insurers to carry out medical check-ups to find out whether there is any impact on the individual’s health. So, the risk of insuring someone who is already affected by COVID-19 needs to be carefully evaluated and provided for.

Even before COVID-19, many reinsurers had increased premiums due to adverse mortality experience. The regulator has allowed Up to 5 per cent revision in prices based on the new inclusions in health products. Also, some companies may have raised rates other than that.

According to the Ministry of Health and Family Welfare, there were 5.27 lakh active cases in India as on November 5. The number of people discharged was 77.11 lakh and 1.24 lakh died due to the pandemic. Insurers are already expecting an increase in the loss ratio of the health portfolio.

They expect the loss ratio for the retail health policy to go up from current 65-70% to 80%. Non-life insurers are seeing rising demand for health policies under the Equated Monthly Installment (EMI) option. Insurers attribute this to reduced affordability due to a fall in income and job losses, even as the need for a cover has gone up due to the pandemic.

The industry is coming up with new digital health products that the customers are wanting to test. There is a change in consumer behaviour because there is a genuine need for the product. Insurers also see the distributors adapting to the new normal and serving the demands of our customers.

All the initiatives taken by the industry towards digital adoption are registering a lot of acceptance from the customers and a greater push from our distributor network as well. Starting October 1, the Indian health insurance industry has seen a major revamp, resulting in health insurance policies becoming far more customer-centric than earlier.

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