What is Insurance?
Insurance is a method of spreading the risk. It is based on the legal maxim ‘Uberima Fidae’ which means utmost good faith. In simple terms, it can be called as a method of collecting premium from a large section of the society and pay the claim of a comparatively smaller section of the society, which suffers loss of damage due to certain sudden and unforeseen event.
Insurance is a contract of indemnity to the person who suffers a loss due to any unforeseen sudden event. In India, the ‘Life’ and ‘Non-Life’ insurances are managed by two different authorities. The non-life insurance is also known as general insurance in common parlance. While life insurance coverage is exclusively handled by the LIC of India and other life insurance companies, the non-life insurance portfolio like health insurance, agricultural insurance, motor insurance, marine insurance, fire insurance, miscellaneous insurance etc. are managed by the general insurance companies.
What is the Trend of Insurance?
In USA, in 2005, about 16% of people were not insured for healthcare.1 The scenario in India is very different. Currently, at least 90% of Indians are not insured. But the insurance industry has grown steadily over the last few years. While there were five insurance companies in 2000, the number went up to 30 in 2007.2 According to US census 2007 there are 116 million consumers have a choice of health insurance as of now. This is expected to grow up to 151 million by 20113
Health Insurance
Health insurance is a form of insurance that pays for medical expenses. It is sometimes used more broadly to include insurance covering disability or long-term nursing or custodial care needs. One of the major reasons why Health Insurance is becoming admired in India is the swelling cost of medical treatment today, which is beyond the reach of the common man in India. Health insurance policies are annual contracts and are subject to renewal by the same or any other insurer transacting general insurance business, on the same or fresh terms and conditions depending on the claims experience under a particular policy.
Health insurance works by estimating the overall risk of healthcare expenses and developing a routine finance structure (like a monthly premium or an annual payment) that will ensure that money is available to pay for the healthcare benefits specified in the insurance agreement. Health insurance claims are settled by the authorities constituted for the said purposes under a license granted by the Insurance Regulatory and Development Authority (IRDA). These authorities are called the ‘Third Party Administrators’ (TPAs).
The health insurance has so far not gained that much popularity among the public. However, the rising cost in the medical treatment and the change in the social pattern of life are leading to a lot many serious illnesses; this branch of insurance is slowly gaining importance. Some of the state governments are taking positive steps to cover all their employees under the health insurance. It has almost become mandatory for the corporates to cover their employees under the health insurance scheme. In each case, the covered groups or individuals pay premiums or taxes to help protect themselves from high or unexpected healthcare expenses.
The government of India has, in coordination with one of the public sector companies, introduced a health insurance scheme for the families below poverty line called, ‘Universal Health InsurancePolicy’, in South India and the policy was issued by United India Insurance Company, which has its registered office in Chennai. The premium, which was subsidized by the government and the issuance of policy and settlement of claims were managed by the insurance company mentioned above. The other three govt. companies were co-insurers with the principal insurer.
Similarly, LIC of India introduced a policy called ‘Varishta Bima Yojana’, which was a pension scheme for the employees of LIC, who were above 60 years of age, where the interested persons had to deposit around Rs. 2,60,000 and they would be entitled to receive a sum of Rs.2000 monthly.
In addition to the Mediclaim policies, the companies also grant ‘Personal Accident Policies’ for individuals as also a group of persons. These policies grant relief to the insured when he/she meets with an accident and suffers death or bodily injuries in an accident. The cover would vary from 24 h cover or for limited hours cover. The compensation payable is predetermined and the same would be paid to the insured/or his/her legal representatives in the event of death or injuries as the case may be. The amount payable in injury cases would depend on the severity of the injuries and the extent of disablement suffered.
How Consumers React to the Health Issues
The cost of health care is a major concern for the consumers. A recent McKinsey report has pointed out that their respondents in a survey were more concerned about the financial implications of injury or illness than about injury or illness itself.
Around 48% of those who are concerned were prepared for common medical problems, whereas only 15% for more disruptive medical conditions, which leads to impairment and require long-term medical and care. It was noticed that young people between 18 and 34 years were more concerned about their dental needs and safeguarding themselves from the consequences of major accidents. Older people were more concerned about managing major medical events and long-term care. The older people believed that they are the most prepared and the middle age the least prepared for managing major medical events but when it comes to financial preparedness for health problems only 32% and 23% of the respondents respectively, were reported that they are prepared.
Thus, people are ill-prepared and confused about the medical care requirements. This confusion can lead to inappropriate financial planning and affect the way consumers purchase health insurance. It is found that majority of the buyers stick with products that they know because of the confusion and the difficulty in evaluating different available options. 6
- Since the insurance contract is based on the principle ‘Uberima Fidae’, (utmost good faith), it is the duty of the person buying the insurance policy to furnish all the details correctly.
- One should, first of all, assess one’s requirement. He/she should then discuss with the agent who is selling him the policy and choose the right policy.
- He/she should estimate the outgo towards premium and ensure his/her capability to pay the same without break. Otherwise, the policy would lapse.
- It is necessary that the terms and conditions of the policy that he/she taking is properly understood.
- Before finalizing the policy, he should understand clearly what are the risks covered under the policy and what are the exclusions.
- He should also understand the claims procedure in the event of one arising, and maintain all the documents required or are helpful in processing the claim.
- In the event of the claim occurring, he should immediately inform the insurer concerned and furnish all the details called for by the insurer in order to facilitate them to settle the claim as early as possible.
Benefits
Health insurance takes care of the high costs of treatment, which an ordinary person may not afford otherwise. Critical illness cover would relieve the burden of high costs. The
cashless facility at the hospitals, offered by the companies also saves botheration of arranging the costs of treatment in a sudden development.
Drawbacks
The common man is still not properly educated about the importance/necessity of the insurance. The companies do not sufficiently advise the insuring public about the coverage and the exclusions under the policy. The general impression is that once the policy is taken, all under the sun is covered. This leads to a shocking situation to the insured when the claim becomes not payable.
The conditions under the policy are printed in very small letters and are not in vernacular. Many an insured would not be in a position to understand the same. Claim dealing involves heavy documentation. Delay in settlement, if any, would put the insured into avoidable problems.
Conclusion
Insurance is a ‘must’ for the society as a whole and it shall be the prime concern/duty of the Government to popularize and provide insurance cover to all especially to the rural sector who are still not aware of what an insurance is. The consumers are concerned, confused, and unprepared and rely heavily on personal recommendations and brand recognition. The over all industry is shifting towards a retail model from the current wholesale model. The providers should take care of the needs, desires and habits of the consumers to provide better health insurance policy.
Written by: Healthplus24 team
Date: Jan 21st,09