Life insurance companies to offer 'Saral Jeevan Bima' from Jan 1
The Insurance Regulatory and Development Authority of India (Irdai) has directed all life insurance companies to offer a standard term insurance plan – Saral Jeevan Bima – from January 1 next year.
 
"Customers who cannot devote adequate time and energy to make informed choices find it difficult to select the right product. Also, products may not be available for the intended sum assured. So we felt the need to introduce a standard, individual term life insurance product, with simple features and standard conditions," Irdai said.
 
"A standard product will make it easier for the customers to make an informed choice, enhance the trust between the insurers and the insured, and reduce mis-selling as well as potential disputes at the time of a claim settlement," the regulator added.
 
The Saral Jeevan Bima will be a pure term life insurance product that can be purchased by people in the age group of 18 to 65 years and will have a policy term of 4 to 40 years. The standard term life insurance will mandatorily offer a sum assured between Rs 5 lakh and Rs 25 lakh. The Irdai, however, allows the life insurance companies to offer a higher sum assured as well without changing any conditions.
 
The Saral Jeevan Bima will have no maturity benefit and will have a 45-day waiting period. On exclusions in the policy, the guidelines said "only suicide clause, as per extant regulations".
 
It further said the product should be offered to individuals without restrictions on gender, place of residence, travel, occupation or educational qualifications.
 
The regulator feels such a standard product will reduce instances of mis-selling and disputes at the time of claim settlement.
 
In its circular, the Irdai asked all the life insurance companies to file the product with the Irdai latest by December 31 this year. "However, insurers may file the product earlier and offer the same on approval even before January 1, 2021," the insurance regulator said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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  • Is Health Insurance the Panacea for All Illnesses? -Part 2
    This part touches on the government schemes and why they are unlikely to accomplish what they are meant to achieve. The article then sets out some imperatives and suggests workable solutions.
     
    The most invidious part of this entire story is that, somehow, the government has ceded the space to private sector. Most state governments and states have ignored the need to build more hospitals and provide better facilities. Services provided in the existing hospitals have deteriorated. The question that the citizenry should ask is: can the government continue to absolve itself of this primary responsibility? 
     
    Healthcare is a public good of the first order; it cannot be left entirely to the insurance sector. Sadly, even government-sponsored schemes help to obscure the policy failures in this area – once the government has set up a hospitalisation insurance scheme for the economically weaker sections and paid the premium, it is absolved of responsibility. 
     
    Shankkar Aiyar’s meticulously researched book The Gated Republic contains an entire chapter on the state of healthcare in the country. The Chapter is aptly titled ‘Bypass Surgery’. To quote his striking observation “…politicos and parties formed a consensus that given the state of public healthcare systems, medical insurance should be made available to the poor to access treatment from private health centres. The idea, of partly offshoring the state’s obligation.….was not born in the health department (but) was conceptualised at the department of labour welfare. 
     
    “The original was tweaked and presented as the Rashtriya Swasthya Bima Yojana (RSBY). National Health Policy 2017 recognised that the gaps in the public health services would be filled by strategic purchasing. ‘Strategic purchase’ – outsourcing public healthcare from private providers found expression in … PMJAY (Ayushman Bharat).”
     
    Ayushman Bharat
     
    Ayushman Bharat PM-JAY aims at providing a health cover of Rs5 lakh per family per year for secondary and tertiary care hospitalisation to over 10.74 crore poor and vulnerable families (approximately 50 million beneficiaries) that form the bottom 40% of the Indian population. The households included are based on the deprivation and occupational criteria of Socio-Economic Caste Census 2011 (SECC 2011) for rural and urban areas, respectively. 
     
    Ayushman Bharat is a significant step in the direction of ensuring hospitalisation treatment for weaker sections of the society, but the questions remain about the integrity of the treatment. 
     
    Ayushman Bharat works on a composite trust-cum-insurance model, i.e., some states pay the premium to insurance companies for this scheme, others have set up trusts into which the premium is paid and out of this fund claims are paid. We, therefore, have no way of ascertaining the claims ratio of Ayushman Bharat, since the premium spend on the ‘trust model’ is not yet in the public domain. 
     
    The main argument against the model of PMJAY is that government funds are being used to subsidise the private health sector where costs are almost double or even three times what is spent in government hospitals. Public health experts have always cautioned against the menace of fraudulent claims and the mammoth exercise of following up on them. The simplest solution would have been to strengthen the public healthcare system, expand it and reduce the dependency of people on the private healthcare sector.
     
    However, notwithstanding the claims of success, an annual report released by the government highlights some of the very pitfalls that public health experts had been cautioning the government about publicly funded and privately managed health insurance schemes. These range from fraudulent claims to a spike in the number of surgical procedures, particularly hysterectomies, the majority of which were found to be conducted in private hospitals. 
     
    In this context, it is interesting to see the note of caution sounded by an expert “Primary caregivers/ hospitals often don’t adhere to the terms of the insurance policies resulting in very high outgo for patients. This is an area that requires to be addressed by the government as well.”
     
    Let Them Eat Cake 
     
    Every conversation on this issue comes down to one point, that is, how much of the GDP is spent on health. In a recent interview, NK Singh, chairman of the 15th finance commission, said that the commission could recommend spending 2.5% of the GDP on health. The current public outlay on health is close to 0.9% of the GDP, of which about 0.6% comes from states and a little close to 0.3% from the Centre. 
     
    He goes on to add that that the poorer parts of India have significantly lower health infrastructure compared to the national average, which itself is lower than expectations. So how do you correct this kind of serious distortion? (Certainly not by spending money on health insurance premium). 
     
    In this interview, he recognises the need to “re-prioritise the current expenditure to meet the needs of the health sector…to involve panchayats and urban local bodies…because they have the cutting edge in the primary health sector.”
     
    Another recent news item says that there are plans to expand the PMJAY to the 'Missing Middle' i.e., to extend the benefit of the existing insurance schemes for the segment of the population not covered by any sort of Central or state insurance programmes or not benefited by any employer or corporate group covers. 
     
    While the intent is laudable, such initiatives would have a desired impact only when the issues on supply side are addressed. Presently, such schemes focus on creating demand for medical services by offering free insurance, at a time when the capacity is manifestly limited.  
     
    The National Digital Health Mission (NDHM) is another ambitious mission which aims to equip more than 1.3 billion citizens of the country with a one-stop solution for each citizen’s healthcare. It will come under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY). The NDHM is going to be a digital infrastructure aimed at delivering the healthcare needs for anyone and everyone. 
     
    The mission will provide health IDs similar to Aaadhar. It will store every single information of a human case healthcare history. The ID, once created, will allow data sharing between hospitals and doctors digitally. 
     
    Apart from very real issues concerning privacy and confidentiality, is the proposed measure not akin to putting the cart before the horse? When the health infrastructure, both public and private, is severely limited, should not the authorities deploy resources on correcting the fundamental fault lines? Digital records and their instant availability would come much later. This episode reminds one of the saying immortalised by the French Revolution – let them eat cake if they do not have bread!
     
    The critical question is whether health insurance is a substitute for the ailing public healthcare system. In most of the western world, excluding the US, public healthcare system is the first recourse for an individual—only those who aspire for five-star care buy private health insurance. UK’s NHS (National Health Service) is a case in point. On the other hand, we seem to be going the way of United States, where private health insurance is so expensive as to qualify as a scandal and a national shame. 
     
    It is unaffordable for anyone who is not the employee of a corporate entity, in fact most people dread losing their jobs for fear that they will lose company bought insurance coverage and will have to fend for themselves.
     
    A Likely Scenario
     
    In this context, it is tempting to reproduce a case quoted in David Pilling’s bestseller The Growth Delusion. This relates to US, and the year is 2012. A sixty-four-year-old lady felt pains in her chest. She was driven four miles by ambulance to a hospital where she underwent three hours of tests and had some fleeting encounters with a doctor. Eventually she was told she had nothing more than indigestion and was sent home. That was the good part. 
     
    The bad part was the bill: $995 for the ambulance, $3,000 for doctors and $17,000 for the hospital – altogether $21,000 for a routine screening. Heartburn has never been so expensive. 
     
    While the theme of the book is not related to medical insurance alone, this case presents the reality of private insurance driven healthcare system in the US. 
     
    Incidentally, the patient concerned had no health insurance and one doesn’t know whether there were any public healthcare facilities in the vicinity or whether the well-wishers who took her to the hospital had any idea about her not having insurance cover. 
     
    One does not have to stretch one’s imagination to anticipate that a similar state of affairs can come to pass in India if government cedes tertiary healthcare to private hospitals on the presumption that insurance will take care of the patients’ bills. How many people who are not eligible for government schemes will be able to afford the growing cost of healthcare or health insurance?  
     
    The reality is that insurance is a business and, like all businesses, the primary purpose of insurance companies is profit maximisation. Similar motivations drive the private health providers, be it hospitals or their cohorts. Price of any service depends on the demand supply situation and in India demand for healthcare far exceeds the supply. 
     
    In addition, there is the normal cost inflation which pushes up the price of hospitalisation and other ancillary services. Since there is no price regulation of the health providers, the price of service will invariably rise every year which in turn push up the price of health insurance, i.e., premium.  
     
    If insurance industry comes to believe that due to regulatory pressures or popular discontent, they cannot push up the premium to the required level, they will stop selling health insurance. This has happened in several countries across the world. 
     
    In a vast country like ours where people and politics are in varying stages of evolution, and regulatory independence is work-in-progress, health insurance does not automatically translate into an affordable and reliable healthcare environment. Healthcare cost-inflation is a reality; insurance companies will charge a premium that assures them a level of profit. 
     
    When Ayushman Bharat was conceived, it was expected that the premium will be around Rs1,100 per family per year; but since this became unviable for insurance companies, the limit was raised to Rs2,000. Experience shows that the premium doubles approximately every four to five years. 
     
    Assuming that a large percentage of population is covered by the basic government schemes, say 200 million families over the next five years, the premium at the end of the period may rise to roughly Rs5,000 per family per year – or Rs1 lakh crore! Where will this money come from? 
     
    Most of these will end up in the pockets of private hospitals and their cohorts, and this offers no guarantee that everyone who needs healthcare will get it. It is self-evident that this money is best spent on building public health services.
     
    What Can Be Done
     
    The foregoing example is simplistic but, hopefully, it helps illustrate the vast financial outlay needed year on year without anything to show for it in terms of the social infrastructure. A day will come when health insurance premium will become unaffordable for private buyers and will cause tremendous strain on public finances for funding government schemes. 
     
    As the population starts ageing, its healthcare needs will increase accordingly. There will be fewer and fewer young, working age people with the ability to indirectly subsidise the older population. What will then happen to an average citizen whose healthcare needs are growing but whose income is declining as they are on pension or other retirement income? What will the people, who are not covered by employer or government schemes, do? 
     
    Health Insurance serves a useful function in any healthcare ecosystem; but this should be a choice, not a primary recourse. The idea here is to highlight the dangers of assuming that insurance will automatically lead to a robust healthcare infrastructure.  
     
    Merely because of the systemic challenges, the government should not take the easy way out. The imperative of strengthening the public healthcare infrastructure cannot be brushed away by pointing at the sorry state of the government hospitals and dispensaries, which will be tantamount to throwing away the baby with the bathwater. 
     
    If we were to justify outsourcing by pointing at the poor performance of government facilities, why not outsource another failing public service—law and order, since performance failures on this count are starkly evident?
     
    Only public pressure can force governments, whether at the state or at municipal levels, to discharge its duties. Healthcare is primarily the responsibility of state governments but for whatever reasons, they have passed the buck to municipalities in larger cities. In turn, municipalities have steadily neglected the need to build healthcare infrastructure. 
     
    There is more ‘money’ in building flyovers where none is needed, in ripping up perfectly serviceable roads and footpaths and re-laying them, and ‘beautification’ of cities. As for the state governments, they prefer to spend on grandiose projects, memorials, and monuments, having taken the position that the State-sponsored health insurance schemes will make the problem go away.  
     
    Given the inertia and corruption that pervades any State activity, any change in the status-quo is going to be a long journey. However, as the saying goes, journey of a thousand miles begins with the first step. The two policy imperatives that emerge from the current scenario are that firstly, the state should start enhancing its own hospital infrastructure, under an autonomous authority on the lines of NHS in UK. The existing government and municipal hospitals should be placed under this authority. 
     
    Secondly, as this is going to be a long-term project, while this is being rolled out, there should be an independent regulator for private hospitals which should design and implement a procedure and price framework. Possibly the role of the National Accreditation Board for Hospitals and Healthcare Centres can also be enlarged to that of a regulatory body with appropriate monitoring and control powers. 
     
    Unless this happens, health insurance will become progressively unaffordable for the ordinary people and cost of hospital treatment for the uninsured will become catastrophic.  Given the unregulated medical cost inflation, it stands to reason that the premium for government sponsored schemes too will increase steadily, putting a big strain on public finances.
     
    This crisis presents an opportunity to re-examine and re-engineer our healthcare system. Otherwise, we will continue to spend big money both private and public, of which the only beneficiaries will be private hospitals and their cohorts. Health insurance cannot be a substitute for public healthcare. 
     
    The need of the hour is to create a social movement to insist that the public healthcare system should be made to work. While it is heartening to see thousands of people coming onto the street to protest tree cutting, the need of the hour is to show similar awareness of the lack of effective and efficient healthcare apparatus. 
     
    The need of the hour is to build public pressure to force the policy makers to engineer and execute long term remedies. To paraphrase Lokmanya Tilak “Public healthcare is my birth right and I shall have it.”
     
    This is concluding part of a two-part series.
     
    Read first part 
     
     
    (Shrirang Samant has worked in senior leadership roles in the General Insurance Industry, both in public and private sectors, in India and abroad. He has been privy to the transition of this industry from public to private sector in the country and was the founding CEO of a multinational insurance joint venture- JV in India.)
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