How to get the best from your reducing mediclaim options-II

Healthcare costs are galloping and health insurance, the supposed solution, is getting too expensive, erratic and unreliable. What are the options available for a customer?

Yesterday (see: we had seen how 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.

We now explore the various options available to a customer and related issues.

What to buy

Working out the optimum health cover that you may need is the biggest challenge. It varies from person to person and depends on your age, lifestyle and family health history. Ideally, it must also take into account inflation of healthcare costs - around 10%-12% today. For instance, a Rs4-lakh policy would cover a bypass surgery today, but treatments such as chemotherapy, neurosurgeries or dialysis would cost more. A 30-year-old, buying a policy today, must work out what he is likely to pay a decade later, when he is more likely to suffer a major illness.

As against this, Mr Sampathkumar of New India Assurance, says, "70% of our policyholders have only a Rs1-lakh sum assured." The problem is that Indians start looking for mediclaim when they are in their mid-40s. This is partly because of the worry that even a lifetime of payments does not guarantee that your insurer will give you uninterrupted cover and cashless facility as a senior citizen.

Health insurance carries complex policy conditions and so one has to get information about past customer experience including overall company history, claims settlement history and service levels experienced. Experts suggest that one should opt for insurance companies that make the least changes in their terms and conditions, hospital lists, and premium charts. Also, in India, as of now, the track record of consumers is not transferable across companies; hence, it's important to choose a suitable insurer the very first time.

 There are quite a few important parameters you must focus on while comparing health insurance policies. They are: the limits on certain treatments, waiting period for specific diseases/illnesses, waiting period for pre-existing diseases, room rent limits, claims loading, maximum age, network hospitals, day-care treatments, other sub-limits, medical check-up age, pre- and post-hospitalisation costs, etc.

Read the Fine Print

It is important to read and understand policy details to know what is covered and what is excluded. Many policies do not cover pre-existing ailments and conditions arising from them; in some policies, pre-existing diseases are covered after four years. Most policies have a cap on the age of entry for availing a policy. Then there are permanent exclusions like AIDS, cosmetic surgery and dental surgery and temporary exclusions like cataract and sinusitis, which are not covered in the first year but covered later.

Experts who we relied on for this report said, "Currently, among private players, Bajaj, ICICI Lombard, Apollo Munich, Star Health & Max Bupa have a good record of managing various health insurance deliverables." Apollo Munich, Star Health and Max Bupa, which are exclusively in the health segment, have come up with innovations.

Before you choose a particular plan, beware of cheap plans and plans from new players. Almost all companies offering low premium are new ones struggling to gain market share. It is important to remember that their prices are subject to change on renewal without consultation with the customer-as happened with Reliance General which was first reported in Moneylife. The true test of the reliability of new players will be two or three years later - when the claims commence.

Beware of Loading

While choosing a plan, ensure that there is a fair principle behind loading. Loading is the amount charged by the health insurance company on your renewal premium when you make claims on your policy. There are different ways in which loading is calculated by companies: loading for every year of claim; loading dependent on the amount claimed; loading dependent on the claims ratio; loading on certain pre-existing diseases; loading on the age of the person. Max Bupa is one of the few companies which says that, it does not load the policyholder premium because of the claims submitted during the year. Dr Damien Marmion, CEO of Max Bupa, told Moneylife during a press conference that they did not want to give customers the wrong impression, that they cared more about the money than the people, by giving discounts for no claims or loading after claims. Max Bupa has premiums that depend on the age of the person and the location, rather than discounts for claim-free years or loading for claims. In essence, select a policy with a clear method of calculating the loading. Other things being equal, companies that do not have loading as part of their policy are the best. Other than that, select a policy from a company where the loading remains constant, irrespective of the amount, and which is withdrawn after some claim-free period - like Oriental's Happy Family Floater. It is risky to buy a policy where loading is calculated on the basis of the claims ratio as it is going to weigh heavy on your pocket after a claim, for even minor hospitalisation will result in a very high claims ratio.

Group versus Individual

Since group mediclaim policies, typically, cover pre-existing illnesses as well, those who are employed may feel like avoiding buying separate individual cover, since paying an insurance premium would be an additional expense. This may not be a wise thing to do. The employer group mediclaim ceases, once the individual switches jobs or retires. The individual switching jobs may bank on the group cover offered by the new employer, but retirees have no such luxury. Worse, it would be difficult to obtain an individual cover at an advanced age. While group insurance does cover pre-existing illnesses, the individual policy would come in handy once the waiting period ends, or post-retirement, thus ensuring continuous coverage for the insured. If a separate policy seems unaffordable, you could opt for a top-up plan.

Critical Illness Policy

This is offered by life insurers and non-life insurers. If your family has a history of serious ailments, or your lifestyle is stressful, you could take a critical illness plan. Even otherwise, with the increased stress and strain of modern life and an unhealthy and sedentary lifestyle, most of us are becoming increasingly prone to serious illnesses such as cancer, coronary heart disease and stroke. If a critical illness occurs, the company pays the entire sum insured. Advances in modern medicine have made it possible for most of us to survive these illnesses. But it could yet result in the loss of a job or inability to manage one's business and, therefore, a loss of income. In such cases, critical illness cover pays a lump-sum benefit, also helping to protect the person's lifestyle.

Most life insurers have long offered these covers as riders. (Riders are covers for additional risks that also enhance the existing risk cover). These days, these critical illness covers are also being offered as stand-alone policies by non-life insurers, to cover the risk of specific kinds of critical illnesses such as, say, cancer.

According to Mr Sarnobat, director of Medimanage, "Generally, in India, 'critical illness' is sold as a rider by a life insurance company. The sum assured is dependent on the sum assured for life insurance. It could be 100%, 50% or some other percentage of the life insurance coverage as set out in the policy. However, this can also be purchased as a stand-alone contract from a non-life insurer."

The benefit of the health package is that if a person already has a mediclaim policy, and also gets a health policy from a life insurance company, s/he stands to benefit doubly. How does this work? For instance, take the case of a person suffering from cancer and the treatment has cost him Rs2 lakh. He could claim the money against the mediclaim (Rs2 lakh) as well as the health policy benefit from the life insurance company of which he is a customer (another Rs2 lakh). Thus, he will get a total Rs4 lakh, compared to a person who has mediclaim of only Rs2 lakh.

According to Mahavir Chopra, head of e-business at, "It might well be in the future that people live longer; but they are bedridden, or suffer one or another chronic illness. With lifestyle ailments growing among younger people, loss of earnings and high treatment costs for major ailments are a risk. This product helps in providing a lump sum benefit to financially mitigate such a risk." It must be mentioned, however, that only diagnosis of a critical illness like cancer, may not be enough to trigger payment of the policy, if the condition is not life-threatening. Other conditions that might be included are a minimum number of days of illness for a policyholder to make a claim, or a specific period for which s/he must survive after diagnosis. {break}

A few things to remember…

1. Act in good faith: Like any other insurance policy, a health insurance policy is a contract between you the buyer and the insurer, issued in good faith. And, if you fail to make any disclosures required by the insurer at the time of the issuance of the policy, then the policy will not be in force. For example, many insurers ask you questions about your present health before issuance of a policy. If you suffer from heart disease and do not disclose this to the insurer, your insurer will not cover any expenses you incur for treating your heart condition.

2. Coverage: Decide which members of your family need to be part of the health insurance policy - you might find splitting policies to be beneficial.

When buying for a family, check multiple options. Sometimes it's beneficial, from a cost perspective, for the oldest member of the family to have a separate policy. Usually, all insurance companies offer coverage for you and your spouse and up to three children under one policy. Some policies also give coverage for dependent parents in the same policy.

3. Exclusions: Read the list of exclusions of the health insurance policy - both permanent and first-year. Exclusions define the ailments and the conditions for which health insurance coverage will not be valid. For example, a common permanent exclusion is cosmetic surgery. A common first-year exclusion is cataract surgery; it is covered from the second year onwards. Also, check all the details of the expenses that will be reimbursed, e.g., diagnostic and medication costs might not be covered under all health insurance policies.

4. Hospital Network: Check the network coverage of the TPAs being employed by the health insurance company. Ensure that the hospitals near your residence as well as the hospital where you seek regular or specialist treatment is part of the hospital network.

5. Cashless: Check whether the insurer facilitates cashless settlement of claims. You might have a preference for a specific doctor or hospital where you might have been seeking treatment in the past or have a pre-existing relationship. This doctor or hospital should ideally be a part of the insurer's network of hospitals for cashless settlement of expenses.

6. Caps: Due to rising costs of healthcare, many insurers have quietly enforced sub-limits or caps for various kinds of expenses. Check whether there is a maximum amount each plan will pay for a specific expense and if there are any sub-limits on specific expenses.

7. Keep Cash: Always keep some cash aside for medical emergencies as health insurance might not cover 100% of the costs. In many cases, you might end up seeking the costs as reimbursements.

8. Housekeeping: Ensure that all your medical records and supporting documents, including health insurance cards, are kept safely in an easily accessible place known to all your family members. After all, you or your family should not be running around to take care of paperwork when your immediate priority is to get medical care. Ensure that everyone in the family knows the network hospitals near your home covered under the health insurance policy. Storing their phone numbers on your mobile emergency call list would be very helpful.

National Insurance, Bajaj Allianz, ICICI Lombard, HDFC Ergo, Tata AIG General and Iffco Tokio General, offer a critical illness product. Bajaj Allianz and HDFC Ergo charge the lowest premium while National Insurance charges the highest.

Hospital Cash Benefit

A mediclaim policy reimburses only the expenditure incurred in the actual treatment of the disease/illness in hospital. It does not cover expenses such as travel, attendant's lodging, loss of income (for both the patient and/or the attendant), pre-hospitalisation diagnostic tests, medicines and more. Such expenses could amount to as much as 30%-40% of the total cost of treatment. A hospital policy takes care of these expenses. It acts as a supplement to the health insurance policy. Basically, you get a daily allowance for every day spent in the hospital.

Personal Accident Policies

These are issued as fixed benefit policies, whereby specified sums are paid on the occurrence of specified events. These events could be disability or death. The payout is not related to the expenses incurred. Make sure that the policy you buy includes coverage against acts of terrorism. This is available as a rider with life insurance, but you can also buy it as a separate policy from a non-life insurer.

Fali Poncha, India's leading expert in general insurance, says, "We have the cheapest personal accident cover in the world. The same cover overseas would cost 20 times more. The maximum that one would pay for personal accident insurance in India, for someone engaged in sedentary work, would be Rs110 for Rs1-lakh cover." This is true for death plus permanent total disablement which has a minimum sum assured of Rs5 lakh. Premiums are in the range of Rs248 to Rs441.

Unit-linked Health Plan: Out of the premium paid, a part goes towards medical coverage and the rest of it is invested in stocks and bonds. Avoid this. Moneylife's stand is not to combine insurance with investment, especially in the matter of health coverage.

Family Floaters: A floater policy is issued with a single sum insured that covers a number of individuals. Simply put, it is a one premium and one policy for all the members of a family. The cover can be used for any member of the family any number of times, subject to the total cover. Most family floaters have an upper age limit of 55 or 60 years. Moreover, coverage of children under the policy ceases when they reach 25 years of age. Therefore, a family floater is more suitable for a young family.

Annual Renewal

Most health insurance plans are available on an annual basis only. Timely renewal of your health insurance policy is of utmost importance. It is not a one-time buy, but an annual expense that you must budget for. And, like you do not leave your car without an insurance cover even for a day, you certainly cannot afford to be without health insurance for a single day. But, unlike car insurance, you don't get a no-claims bonus if you switch your insurer; your record with your insurer is not transferable. Also, every insurer provides discounts or bonuses for customers who have a claim-free year. Understand these features and take full advantage of them. While renewing, review your coverage amount keeping in mind the relative health of family members and any birth or death in the family.

Companies like Max Bupa, Star and Apollo Munich are offering guaranteed life-long renewal. But we will have to wait and see whether such a guarantee will be honoured. Moreover, they don't specify at what rates renewal would happen as the years advance. After all, the business is bleeding now. Who knows what will be honoured decades from now and at what cost. In the past, insurance companies have denied renewals. This led to huge debates, for years, as to whether an insurance company could, on its own, choose whether or not to renew a policy. The Supreme Court has ruled that government insurance companies cannot refuse to provide policies to those suffering from pre-existing diseases. It has also asked IRDA to frame suitable guidelines to ensure that public sector as well as private insurers do not deny medical insurance to people. IRDA has already issued a guideline (in the context of senior citizens, but it will logically apply to all) that any proposal for health insurance which is denied on any grounds, should be made in writing with reasons furnished and recorded. The regulator has further provided that such reasons should stand the scrutiny of reasonableness and fairness. On paper, no PSU insurer should deny your policy renewal.

Making Claims

More than buying the right insurance, making claims is becoming a major area of difficulty for consumers. Troubled by high claims following undisciplined policy selling, insurers have gone to the other extreme. Now they are rejecting claims on the slightest pretext. So, you must strictly follow the insurer's norms when making a health insurance claim, otherwise the settlement of the claim could be delayed or rejected. Read the fine print and understand the process of making a claim thoroughly from the agent or broker. Ensure that your family members also understand the process, in case you are the one who is afflicted.

Key Issues To Remember

Documentation: Every insurer specifies the documents to be submitted at the time of making a claim. This includes providing original documents like the final bill with a detailed break-up; the original and complete discharge card mentioning the duration of ailment; original investigation reports with corresponding prescription/request; and pharmacy bills, along with the claim forms signed.

Time Limit: Usually, the claim must be submitted within 30 days of the patient's discharge along with necessary documents. The time limit varies from insurer to insurer, but is being shortened. Oriental Insurance offers a time limit of just seven days, in certain cases.

According to Rohan Dukle, director of Magus Corporate Advisors, policyholders are often careless on the claims aspect. Some of the common problems that he has noticed are:

  •  No intimation made to insurers during hospital admission;
  •  Policy documents not traceable;
  • Proposal forms not available;
  •  No clarity on possible costs;
  •  Lack of awareness about conditions relating to document filing.

Note that insurers are adding a lot of items in fine print in order to survive. These relate to a cap on expenses, minimum waiting period, documentary support, service charges, and so on. For instance, there are policies which not only cap/limit your room rent, but they may also cap/limit the full claim, Mr Dukle explains.

For example, if your policy is for a sum of Rs2 lakh, with 10% room rent limit, this makes you eligible for a room rent of Rs2,000 per day. Now, if you are admitted to a hospital room that costs Rs4,000 per day (but your policy entitles you to only half that amount), not just the room rent, but your entire claim payment could be reduced by half. The argument is that on a higher room rent, the costs of procedure and doctors' charges increase proportionately, inflating the hospital bill. If you are not very careful, these conditions could easily be used to reject your claim. This leads us to the final issue. What happens when you have a complaint, especially if your claim has been rejected or the claim payment has been reduced?

Grievance Redressal

In health insurance, claims can be argued by both sides. Forced to defend their bottom line, insurers could cut, reject or deny your claims outright. On this, you can approach the insurer's grievances cell. If you are still not satisfied with how they have treated you, you can approach the grievance redressal cell (155255) of the IRDA.

This cell has been specifically set up to look into complaints from policyholders. You can also go to the insurance ombudsman. There are other forums - like the consumer courts and the civil courts - that one can approach to seek justice, but they are costly, time-consuming and they could be ineffective. Since insurers know that the redressal mechanisms are ineffective, or may take substantial time before providing relief, they tend to reject borderline claims.

Therefore, there is no option but to be more than careful. Additionally, try to build a nest-egg through long-term investments in stocks and mutual funds. Depending on such mediclaim could turn out to be inadequate for many reasons which have already been described in the article. We know that 'Health is wealth' and 'Prevention is better than cure'. Now, it is the time to act.

(This is the final part of a two-part series)


Govt likely to go for disinvestment in 7 more cos this fiscal

New Delhi: The government is likely to dilute its stake in seven more companies this fiscal, including 10% disinvestment in Indian Oil Corporation (IOC) in January and Steel Authority of India Ltd’s (SAIL) stake sale in February, to meet the target of raising Rs40,000 crore, reports PTI.

The public issue of PowerGrid is expected in the second week of November and of Manganese Ore India Ltd (MOIL) towards the end of November.

That would be followed by Shipping Corporation of India (SCI) in the first week of December, while Hindustan Copper Ltd’s (HCL) public subscription would open on the second week of December, according to the background note of finance ministry for the Economic Editors' Conference that began today.

"The department of disinvestment is hopeful of achieving this (Rs40,000 crore) number," it added.

The New Year will begin with the 20% follow-on public offering (FPO) of IOC in January, followed by SAIL's disinvestment in February.

"The follow-on public offering by way of disinvestment of 10% of paid-up equity capital of the company (IOC) in conjunction with issue of fresh equity of equal size by the company is expected to open for public subscription in January 2011," the note said.

The FPO by way of disinvestment of 5% of paid up capital of SAIL in conjunction with issue of fresh equity of equal size of the company is expected to open for public subscription in February 2011.

The stake sale in Oil & Natural Gas Corporation (ONGC) is also under consideration for the current financial year, 2010-11.

Aiming to raise Rs40,000 crore through disinvestment this fiscal, the government has mopped up Rs1,062 crore by divesting stake in Satluj Jal Vidyut Nigam, and Rs960 crore through Engineers India FPO.

Besides, it will raise over Rs15,000 crore from Coal India public issue, which closed last week.

Last fiscal, it had raised Rs23,553 crore through stake sale in Oil India, NMDC, REC and NTPC.

The department of disinvestment is in talks with concerned ministries for finalising the quantum of divestment in PSUs like MMTC, Rashtriya Ispat Nigam Limited, Power Finance Corporation, among others.


Personal finance Tuesday

ING Life launches new ULIP; Future Generali to launch in-house cell for health insurance clients; IDFC Mutual Fund launches IDFC Fixed Maturity Plan Eighteen Months Series 7; DSP BlackRock MF unveils DSP BlackRock FMP-3M-Series 23; Kotak Mahindra MF floats Kotak FMP 6M Series 10; Reliance MF introduces Reliance Fixed Horizon Fund-XVI-Series 8; Macquarie Finance gets RBI approval for NBFC registration

 ING Life launches new ULIP

ING Life Insurance has launched a new unit-linked insurance product (ULIP)-ING Prospering Life which meets wealth accumulation and protection needs of the customers.

The new ULIP comes with a host of customer benefits, including five fund options to choose from, automatic asset allocation and unlimited switches with partial withdrawals free of charge.

The product offers an annualised premium ranging between Rs48,000 and Rs96,000 and is competitively priced against other long-term investment options. The sum assured is an amount 10 times the annual premium at inception for those below the age of 45 and seven times the annual premium at inception for those above the age of 45. The minimum top up premium is Rs5000.

  Future Generali to launch in-house cell for health insurance clients

Future Generali India Insurance Company Ltd will launch Future Generali Health (FGH), an in-house cell for servicing health insurance clients from 1 November 2010. Through its in-house cell in Chinchwad, Pune, Future Generali will directly service its health insurance business, gradually replacing third party administrators (TPAs).

The unit will start with a team of 40 professionals. The team will also consist of medicos and hospital management graduates. The entire health vertical of the company, which includes health call centre, underwriting, claims and networking, will operate from this single location.

KG Krishnamoorthy Rao, CEO, Future Generali said "We have decided to directly service our clients through our in-house servicing unit Future Generali Health (FGH)."

This initiative will help Future Generali in analysing high quality data that will contribute towards product development and pricing. Efficient data management capabilities will also help structure tailor made solutions for corporate clients thereby ensuring a combination of excellent service and cost management.

FGH will start with over 1,000 hospitals. The company is also creating a network of diagnostic centres across country for pre-policy check up.

Recently, Future Generali has revised its flagship product, Health Suraksha. It is a hospitalization expenses product with sums insured ranging from Rs1 lakh to Rs10 lakh and the product has plans with coverage and pricing suitable for rural as well as urban clientele.

IDFC Mutual Fund launches IDFC Fixed Maturity Plan Eighteen Months Series 7

IDFC Mutual Fund has launched IDFC Fixed Maturity Plan Eighteen Months Series 7, a close-ended income scheme. The investment objective of the scheme is to generate income by investing in debt and money-market instruments maturing on or before the maturity of the scheme. The scheme will invest 100% in debt and money-market instruments having low to medium risk.

During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The scheme offers growth and dividend option. The scheme closes on 29th October. The exit load for the scheme is nil. The minimum investment amount is Rs10,000. The minimum target amount is Rs1 crore. The scheme has duration of 18 months. The scheme shall mature on 3 May 2012.

CRISIL Composite Bond Fund Index is the benchmark index. The scheme will be managed by Anupam Joshi.

 DSP BlackRock MF unveils DSP BlackRock FMP-3M-Series 23

DSP BlackRock Mutual Fund has introduced DSP BlackRock FMP-3M-Series 23, a close-ended income schemes.

The primary investment objective of the schemes is to seek capital appreciation by investing in debt and money-market securities maturing on or before the maturity of the schemes. The schemes have duration of three months.

During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The schemes offer growth and dividend (payout) options. The schemes open on 26th October and close on 3rd November. The exit load on the schemes is nil. The minimum investment amount is Rs10,000.

CRISIL Liquid Fund Index is the benchmark index. Dhawal Dalal is the fund manager.

 Kotak Mahindra MF floats Kotak FMP 6M Series 10

Kotak Mahindra Mutual Fund has launched Kotak FMP 6M Series 10, a close-ended income scheme.

The investment objective of the scheme is to generate returns through investments in debt and money-market instruments with a view to significantly reduce the interest rate risk. The scheme will invest 100% in debt, money-market instruments and government securities having low to medium risk.

During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The scheme offers growth and dividend (payout) options. The duration of the scheme is 180 days. The scheme opens on 26th October and closes on 28th October. The exit load for the scheme is nil. The minimum investment amount is Rs5,000. The minimum target amount is Rs1 crore.

CRISIL Short Term Bond Fund Index is the benchmark index. The scheme will be managed by Deepak Agarwal and Abhishek Bisen.

 Reliance MF introduces Reliance Fixed Horizon Fund-XVI-Series 8

Reliance Mutual Fund has launched Reliance Fixed Horizon Fund-XVI-Series 8, a close-ended income scheme.

The primary investment objective of the scheme is to generate regular returns and growth of capital by investing in central and state government securities and other fixed income/debt securities maturing in line with the time profile of the scheme with the objective of limiting interest rate volatility.

During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The duration of the scheme is 459 days. The scheme offers growth and dividend (payout) options. The scheme opens on 26th October and closes on 27th October. The exit load for the scheme is nil. The minimum investment amount is Rs5,000. The minimum target amount is Rs20 crore.

CRISIL Short Term Bond Fund Index is the benchmark index. The scheme will be managed by Amit Tripathi.

 Macquarie Finance gets RBI approval for NBFC registration

Macquarie Finance (India) Pvt Ltd (MFIPL) has received the approval from Reserve Bank of India (RBI) to register the company as a non-banking financial company (NBFC).

MFIPL is a wholly-owned subsidiary of Macquarie Group and will provide a range of financing products and services to clients of the Macquarie Group in India.

Macquarie has a significant presence in India. Its business activities include corporate finance and advisory, infrastructure funds management, cash equities sales and research and private wealth management.

The NBFC registration provides Macquarie Group opportunities to start other businesses in India. Activities that can be conducted by RBI registered NBFCs include leasing, corporate and consumer financing, provision of loans and advances.

Macquarie Group is a global provider of banking, financial, advisory, investment and funds management services.


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