Questions answered by Mr. S K Sethi, our Health Insurance expert and Vice President of Insurance Foundation of India.
Onlymyhealth: What factors should be considered before buying a Health Insurance Policy?
Try to cover all the members of the family because you do not know who may need hospitalization due to illness, epidemic or accident.
Factors to be considered before buying health insurance policy are:
1. Individual or Family Floater – Family floater is generally 40% cheaper. Therefore try to go for it rather than individual floater.
2. Sum Assured – The sum assured should be reasonable. Keep in mind that most insurance companies put limit on Hospital Room Rent @ 1% of sum insured. It means if Rs 3, 00,000 is the sum assured then Rs 3,000 per day will be permitted under the head of room rent. If you are staying in a hospital for 6 days and room rent is Rs 7,000 per day then you will pay Rs 4,000 x 6 = Rs 24000 out of your own pocket.
3. Renewable up till what age – Some policies expire when an individual is either 70 years or 80 yrs while some are for life.
4. Co Payment – In a couple of policies, some percentage of claim amounts is to be paid by an individual. Oriental Happy Family Floater has 10% co payment upto sum assured of Rs 5 Lakhs and D % from Rs 6 lakhs to Rs 10 lakhs. Most senior citizen policies have this condition and co Payment can be 10 % to 50 %. Co payment at Max Bupa starts when an individual turns 65.
5. TPA used or not –
Group 1 – Health Insurance Companies that do not use TPA
• Bajaj Allianz General Insurance Co. Ltd.
• Star Health and Allied Insurance Company Ltd.
• Cholamandalam MS General Insurance Co. Ltd.
• ICICI Lombard General Insurance Co. Ltd.
• Max Bupa Insurance Company Ltd.
Group 2 – Some use TPA as well as in house – (both options)
• Apollo Munich.
• Oriental – If you give away the right to use TPA and cashless – you get 5% discount
Group 3 – Companies that use TPA's
The remaining Companies use TPA’s.
6. No Claim Bonus / discount
Most companies give No Claim Bonus in the form of cumulative Bonus (5% to 10%) subject to limit of say 50 %. Reliance gives 5% discount in premium. Max Bupa gives vouchers worth 10% of renewal premium to be used for OPD / pharmacy / diagnostic tests. Oriental neither gives cumulative bonus nor discount on individual policy. However, it gives 5% discount on Family Floater.
Onlymyhealth: What are the reasons behind poor penetration of health insurance?
Till recently government hospitals were main provider of healthcare facilities on a free of cost basis. In the last 10 years, Private Health Care has become a more popular trend for which one is required to pay.
At40% growth year after year, health insurance is the fastest growing segment of Indian insurance industry. Insurance Companies are losing money in this portfolio. During 2009-10 against premium income of Rs 8,300 cores claims paid were Rs 10, 300 crores. This means that there was a loss of Rs 2,000 crores.
In a couple of years time, this segment is expected to overtake vehicles insurance segment of Indian non life insurance. Government supported schemes like RSBY are also giving a good push.
Onlymyhealth: What is the current status of private health insurance in India?
Even today 70% of health insurance is under control of 4 PSU’s (New National, Oriental & United). With entry of 3 private stands above Health Insurance companies, the scene is becoming more and more interesting and active with introduction of attractive products. In addition, 15 non life insurance companies from Private Sector offer health insurance products.
In total 22 insurance companies are selling health insurance products.
Onlymyhealth: After how long should one review his health insurance need?
Generally it should be 5 years. In a recent incident, Reliance increased rates by 231% (April 2010) and this decision compelled policy holders to review the situation and switch over from Reliance to other companies.
Since July 1, 2010 4 PSU’s have stopped cashless facilities in good/ super specialty hospitals there fore those having renewals since July 15, 2010 have started switching over to other companies.
You must review the situation, whenever there is major development. The key is to keep yourself informed.
Onlymyhealth: Could you list five features that characterize Health Insurance system in India?
Characteristic features of Health Insurance System in India are —
1. TPA or In house Cashless or Reimbursement basis.
2. Individual / Family Floater.
3. Renewals upto what age?
4. Network of good and super quality hospitals.
5. Service / claim settlement / reputation / goodwill of the insurance company.
Onlymyhealth: Just as there is a rule of thumb for buying a LIC i.e. it covering at least 6 to 8 times of one’s annual income, is there any rule for Health insurance policy too?
If you are aspiring to be treated in a good/ super specialty hospital then you must have insurance policy for Rs 5 lakhs to Rs 10 lakhs. If you have policy for Rs 1 lakh then in most insurance companies you are eligible for room rent of Rs 1,000 per day, which might be insufficient. Health care inflation is taking place @ 18% year over year and this fact should be kept in mind. If a specific treatment is costing Rs 1 lakh – in 2010, then in 5 years time it may cost you Rs 2 Lakh. You should be prepared for the same. If you are 55 + the insurance companies are hesitant in increasing the insurance coverage. It is better to go in for higher sum in the beginning itself.