Healthcare costs are galloping and health insurance, the supposed solution, is getting too expensive, erratic and unreliable. What should you be doing?
For middle-class Indians, the cost of decent healthcare has been galloping at the rate of 20% per annum, more than three times the general inflation level. Health insurance, which was seen as the answer to their problems, is getting too expensive, erratic and unreliable.
In recent months, public sector insurers have gone to war with expensive hospitals by scrapping cashless facilities on the grounds of massive overcharging. They are also at loggerheads with their TPAs (third-party administrators) for allegedly colluding in the cost escalation. Higher repudiation of claims has become another worry for the consumer. Squeezed by the pincers of poorly-sold group insurance and fraudulent hospitals and TPAs, insurance companies are bleeding. They are reacting by cutting down and withdrawing options and policies and rejecting claims. Worse, despite the best efforts of the regulator, the Insurance Regulatory and Development Authority (IRDA), the redressal of complaints has been slow and inadequate. Added to this confusion is a huge cloud of ignorance on the part of most people, making them perfect targets for mis-selling.
Your medical insurance options are becoming fewer. What should you do to safeguard your interest?
Moneylife talked to a wide cross-section of people to understand the issues - from the perspective of the insurers as well as the consumers. We find that there are no easy answers and the situation will remain chaotic for a while. You need to understand all the issues; have modest expectations; be careful about what you buy; and, most importantly, build safeguards outside the insurance system, because the system will continue to throw up nasty surprises. For starters, there is no option but to understand the current state of the insurance business to interpret the recent events and to know what's coming.
Insurers are bleeding. How will that affect you?
Rohan Dukle, director of Magus Corporate Advisors Pvt Ltd, an insurance claim consultancy firm, says, "The total de-tariffing of the non-life insurance post-2006 (from 1 January 2007) triggered major price wars in hitherto profitable segments such as fire, engineering (insurance), and so on. There is increased pressure on bottom lines; this, coupled with the lower ceding commissions, has forced insurers to reconsider pricing. This pressure is not expected to reduce anytime soon because of the constant influx of new entrants into the non-life segment."
Sudhir Sarnobat, co-founder and director of Medimanage Insurance Brokers, believes that, "Healthcare insurance costs will go up in the next three years because private insurers need to make profits." He also points out that the costs are increasing for healthcare providers, like the cost of land, the latest medical equipment and high-calibre manpower. He estimates a 15% increase in insurance premium every couple of years.
Cutthroat competition has led to insurers offering ridiculous terms to grab business volume (like group insurance from corporates) and this has resulted in losses. The extent of competition is evident from the reports of the Comptroller & Auditor General of India for 2006-09 which show that the four PSU insurance companies suffered a loss of Rs417 crore on individual portfolios and a loss of Rs622.49 crore on group policies. So aggressive was their pricing of group insurance that three top Tata group companies -TCS, Tata Motors and Tata Power - preferred to buy insurance from public sector providers rather than from their own group entity.
Finally, false and fraudulent claims were widespread, especially because of the industry practice of handing over claims processing to TPAs. "Insurance companies have been witnessing inflated, fraudulent, and unwarranted claims from some hospitals,"
M Ramadoss, CMD, New India Assurance, told Moneylife.
All this has led to a major backlash. Things have reached a point where there is no alternative to increasing premiums; simultaneously, appropriate solutions are also being worked out. Segar Sampathkumar, deputy general manager, New India Assurance, tells us that it is impossible to cross-subsidise the costs of group health insurance that are escalating at 30% to 40% per year. Insurers are also prescribing caps to certain specific covers and co-payments, leading to shrinkage in the overall cover. In short, be prepared to deal with insurance providers who are under a lot of pressure and who will, therefore, try to get away by being nasty.
Earlier, insurers followed the policy of "pay if you can, reject if you must"; they now have a policy of "pay if you must, reject if you can." Nagesh Kini, who has been an auditor of insurance companies, says, "The aam aadmi has no alternative but to fork out ever-increasing insurance premiums." He believes that all insurers have "resorted to grossly unfair practices, such as refusing covers, imposing unreasonable loads, hiking premium rates, withdrawing/reducing benefits, rejecting, delaying and/or resorting to ham-handed deductions, or disallowances from claims lodged without assigning valid reasons."
(This is the first part of a two-part series)
The local market is likely to see a flat-to-positive opening today. Wall Street settled mixed on Friday as investors took a breather after the recent gains on good earnings reports. Markets in Asia were trading mostly higher in early trade today as Group of Twenty (G20) leaders asserted their willingness to calm the currency turmoil, which is hurting the global recovery. The SGX Nifty was up 18 points at 6,105 against its previous close of 6,087 on Friday.
Besides global cues, corporate earnings reports will also guide the Indian market today.
The Indian market ended flat in the week ended 22nd October, after a two-week losing streak. Global cues, quarterly earning figures and fund flows towards the mega Coal India Ltd (CIL) initial public offer (IPO) led to volatile trading throughout the week. The market settled in neutral territory with the Sensex logging gains of 40.81 points and the Nifty adding 3.40 points in the week.
The US market ended mixed on Friday as investors took a breather after the recent gains on good earnings reports. Marketmen waited for the outcome of the two-day G20 finance ministers meeting, which was due to be announced on Saturday. Meanwhile, an economist at Goldman Sachs on Sunday opined that Federal Reserve might purchase $2 trillion of assets to stimulate the US economy in its meeting on 3rd November.
The Dow fell by 14.01 points (0.13%) to 11,132. The S&P 500 added 2.82 points (0.24%) 1,183. The Nasdaq rose by 19.72 points (0.80%) 2,479.
Markets in Asia were mostly in the green after the G20 leaders stated that they would take steps to calm the currency turmoil. Despite any concrete plan, the statement increased investors’ risk appetite. On the other hand, Japan’s exports grew at the slowest pace this year in September, increasing pressure on the government to step up stimulus initiatives. Overseas shipments increased 14.4 percent from a year earlier, the finance ministry said in Tokyo today.
The Hang Seng was up 0.74%, Jakarta Composite was up 0.27%, KLSE Composite was up 0.21%, Straits Times was up 0.46%, Seoul Composite was up 0.45% and Taiwan Weighted gained 1.17%. The SGX Nifty was up 18 points at 6,105 against its previous close of 6,087 on Friday.
The deal to reform the International Monetary Fund (IMF) to give greater clout to developing nations like India and halt aggravation of the ongoing currency war was struck at the last moment at the conference of G-20 finance ministers and central bank governors in South Korea.
The uncertainty continued till the last minute and it was only in the wee hours of
Sunday that officials, after intensive overnight negotiations, managed to put together a communique that was acceptable to all 20 countries.
Till this (Saturday) morning, the situation was really uncertain. It was clinched in the meeting of G-7 and BRIC finance ministers," Indian finance minister Pranab Mukherjee told reporters.
Moneylife Foundation headed over to Pune to engage the attentive audience in another interactive discussion on issues ranging from credit worthiness and no-fear investing to wills and nominations
Pune, 23 October, 2010: To spread further the message of financial literacy and awareness, Moneylife Foundation had stepped out into the city of Pune in August, where we had received an overwhelming response from the audience. On popular demand from Pune's receptive audience, we headed to the city again today, this time engaging the eager public in an interactive discussion on issues ranging from credit worthiness and no-fear investing to wills and nominations.
In the first half of the seminar, Mr Debashis Basu, Editor of Moneylife and Ms Sucheta Dalal, Managing Editor of Moneylife held an interactive working session on finance titled 'How to be safe and smart with money'. Ms Dalal spoke on how to avoid losses by staying away from certain kinds of investments like chain marketing and pyramid schemes. She explained how these scamsters operate and advised investors to stay away from such frauds. She also spoke about the implications of credit card transactions and the implications of default and its impact on an individual's credit history and ability to borrow.
Mr Basu told people that investment does not have to be difficult and complicated if one was clear about the basic objectives, avoided obvious pitfalls and followed a sensible and consistent investment policy. "Many a times, investors are lured by fast and big returns and opt out for short-term investment. To avoid such risks, investors should think about the long-term and fix goals accordingly," said Mr Basu. He showed how one could keep things simple, avoid complications and make steady returns without becoming an expert on stock markets.
This workshop was followed by another interesting discussion by Aashish Somaiyaa, head - retail sales, ICICI Prudential Mutual Fund. Mr Somaiyaa elaborated on how to go about investing smartly in mutual funds, pointing out the intricacies in choosing the right mutual fund.
Thereafter, Jayesh Desai, senior associate with Singhi & Co engaged the audience on the issue of wills and nomination, bringing out the vastness of the issue and complications that could arise in the same. Mr Desai elaborated on what is a will, its importance and terminology; he explained the requirements of a will and types of wills, the need for a probate, the cost of a probate, how to make changes in the will and described crucial details involving documentation of nominations.
Everybody would want to ensure proper legacy for their loved ones. The way to do this is through a comprehensive will and by completing nominations and transmission formalities for one's movable and immovable properties. Getting a will right is crucial if disputes between heirs over legacy are to be avoided. A will could clear the way. Most of the questions that were raised by the participants related to their individual situations. Mr Desai addressed each question patiently, clearly explaining all important aspects.
Finally, Ch Vishwanath, general manager and head - legal & compliance, Karvy spoke to the audience on the burning issue of transmission of financial instruments.