UNAFFORDABLE HEALTH INSURANCE PREMIUM FOR SENIOR CITIZENS – WHAT HAS GONE WRONG?
Leading dailies are highlighting the sudden rise in premium for Senior Citizens. What the papers failed to highlight was that the premium is now close to 8% of the sum insured, which is quite astronomical and against the concepts of insurability. When premium rises beyond reasonable limits the insurability barriers are crossed and consumers will look at other options and leave themselves uninsured, which is not good, because the burden of losses will fall back to the family, the society at large or to the government. This is particularly unhappy for those many insureds who have had no claims for years but are paying a heavy or impossible price for a contingency which they probably may be lucky not to face in the future also. It is an essential feature of good insurance that the premium costs should be fair, equitable and affordable. So, what has gone wrong?
Traditionally premiums are considered affordable if they are in the region of a maximum of around 3%. This was the case in motor insurance, but the rate was sweetened by No Claim Bonus which could go up to 60% of the sum insured. Unaffordable premiums are found in crop insurance, but they have now moderated to around 9% in India, but still in government schemes (worldwide) there are subsidies by the government even up to 80% and the rate cost for the farmer comes down to around 2%. Claims in crop insurance are high – historically around 25 per 100 farmers. In the case of health insurance, it is 10 per 100 insured persons, but for senior citizens it mat be much higher.
What is the way forward? Health Insurance is a frequency risk, which means there will be many claims, but the pay-out would be usually small. Morbidity affects all but in different variations. Hence there are some persons who are quite disease free but others are likely to be victims of frequent and severe hospitalisation problems. This is especially true for senior citizens. So, the matter of senior citizens health insurance has to be dealt with in different ways. In the USA senior citizens migrate to a Government scheme known as Medicare. In insurance it may be useful to begin an insurance pool, where insureds who face un-insurability problems are moved to a common pool which will be subsidised by all insurers, the government and even hospitals could be compelled to offer special rebates, so that the cost of coverage will be affordable. The most important benefit of this is that the premium load on the general population will come down.
Apart from this it is important that the over-regulation that exists in India for health insurance is written back/ down. As stated by many insurers, the regulations have compelled the rise in premium as the regulations cut off avenues for risk managing and underwrite to keep a balance between those who claim and those who do not. The current Health Insurance Regulation is an improvement over the 2013 version but the Regulations have too many clauses that impinge on insurance underwriting and risk rating. The result is what was feared by forward looking insurance experts – health insurance will be made unaffordable even for those who are not chronically ill or likely to be ill.
Regulations should be very strict about customer services and protection, but should keep away from time tested insurance and underwriting principles and practices. There are many ways that insurers can moderate premiums. The traditional discounts and loadings based on claim experience, the use of co-payment and deductible, restrictions on insurance limits, top up policies and so on. So, for instance when the premium rate is reaching 10%, a co-pay of 20-30%, can bring down the rate considerably, which makes it easier to insure. There could be liberal cover for general illnesses and restricted cover or exclusion for the sure illnesses, because strictly speaking it is difficult to carry losses that will bleed the insurance sector beyond a point without social support from government sources.
It is essential that health insurance is not destroyed at an early stage, by falling to pressures from those who do not understand insurance or even regulation. The concepts of insurability and affordability should be debated so that a public good and necessity like health insurance should bloom and not wither/die. ( To know more about Health Insurance read the book: Understanding Insurance of Health, available for purchase on amazon.in)
Visiting Faculty Member at Christ University, Bangalore
6 年Mr James I wrote an article on this topic which was published in Deccan Herald. What motivated me is that one of the senior citizens mentioned about the steep hike in premium by a leading PSU. She was insured with that insurer for last 20 years. In their younger days no claims. Now her husband is paralysed & they cannot shift to a private insurer . Apollo Munich I understand premium is reasonable but they declined to cover a person who is already paralysed. When I was in the industry the insurers were liberal in giving benefits to corporate clients. I am unaware whether this practice continues.
Independent Insurance Professional
6 年Milan and Pratik have identified the basic problem, Cross subsidising. Surprisingly IRDAI, which has been very customer friendly in some aspects, is itself to blame for this. Initially all figures released by them were segregated for premium but not for claims. Yet the burden of increased premiums was put on individual policies, since they did not have any clout. Recent increase in premium rates by the largest insurer is a case in point. A decade ago when all the PSIs increased premiums there was a committee set up by the IRDA that recommended that the rates be partially rolled back and that PSIs restrict increases to 15-25%. Why only PSIs, don't ask me. But same IRDAI and same PSI but no such restrictions. Why? Another reason is that no innovation has been forthcoming from the Insurance Companies. Even old products such as Bhavishya Arogya and the UTI Health Insurance have not been remodeled to make them marketable and sustainable. Till the insurers think out of the box or even from another's box, customers will continue to suffer and this suffering will increase as they get older.
Team Lead at Medi Assist
6 年The increase in premiums is also due to IRDA sitting pretty just being an spectator and being lenient on bringing forth their own regulations strictly onto the hospitals.
Executive Vice President & Regional Head -Gujarat at IFFCO Tokio General Insurance Co. Ltd.
6 年Individual Health policies are subsidizing the GMC policies. A very pathetic approach taken by the Insurer and totally against the interest of the General Public.
Surveyor & Loss Assessor for Motor & Property (fire, marine, engineering), Ex. Director - Indian Institute Of Insurance Surveyors & Loss Assessors, India (IIISLA)
6 年Preinciple of insurance say spreading of risk to many... Here , Marketing people are failed to penetrate more, Unhealthy discount in premium for other departments. No proper underwriting methodology (clearlly missing contract of certainty.) Diversity criteria is surely missed out. Hence , burdun lies on only motor portfolio and mediclaim insurance... Say fire policy sold at 99 % discount , can't withstand with own claim. Then how come it will support other service policies Motor insurance have heavy income , but dealer driven business has eaten whole portfolio ..Also can't support service policy. Mediclaim and P.A policies are purely service policy......Success of any service policy purely depend upon how it get support from business policy.. But underwriter failed to provide support to such service policies. Underwriter should think on it....