Are You Covered?

Your health may just be the most precious thing you have. Take your medical insurance seriously, says Najaf Ishrati

Jan 30, 2006,
ET Personal Finance, Mumbai.

INSURANCE companies are currently facing the classic chicken and egg syndrome, and more so when it comes to health insurance or mediclaim. A high claims-to-premium ratio, as seen with major PSU insurance providers, makes spending on advertising an unaffordable luxury. However, since insurance has always been a product that has to be sold in India, and not bought, high spending on advertising is needed to increase revenues.
Unlike other countries, India cannot afford to make health insurance mandatory as there is a cramp on infrastructure, with only about 0.7m beds available with the healthcare industry, according to estimates.
Current premium charges are roughly around 1% of the sum assured. This means with the premiums received from a hundred policy holders, the company can clear the entire claim of just one. This is an astounding statistic if you compare the cost of medical insurance in the West, which is much higher. Second, roughly 6% of all policy holders make claims every year, making it difficult for insurance firms to continue at the prevailing low rates. The claim-premium ratio in some firms is 110%, whereas it goes up to 127% in others.
The fact that it is statistically advantageous to get insured even though the insurance firm may be bleeding, the following percentage comes across very strongly. Of the total Indian population, less than 2% have health cover of any amount.
Dr Sandeep Dadia, with TTK Health Services, a leading TPA, says that the time to get yourself covered is now, as these cheap premiums are bound to rise given the cost of medical inflation, which is estimated at around 15% every year. A mediclaim policy is available to persons between 3 months and 75 years of age. For children under three, the policy has to be tied with one held by their parent. In many cases family packages are available which offer attractive discounts.
Mediclaim covers reimbursement of hospitalisation expenses for illnesses, diseases or injuries sustained to the extent that the policy was taken out for. It includes costs incurred for nursing charges, doctors fees and other hospital costs.
All policies have certain exclusions, where the insurance firm refuses to reimburse certain medical conditions. The significant ones are the illnesses which existed prior to the signing of the policy, alcohol and drug abuserelated problems, AIDS, pregnancy and child birth and dental treatment. This list varies from policy to policy.
Also, the policy amount or the sum that you can assure yourself for currently varies from Rs 15,000 to Rs 5 lakh, though efforts to raise the minimum sum assured are already underway. But the big question is, how much do you insure yourself for?
Industry players say that ideally the sum assured should be a function of your age and your capacity to pay. They say if you can afford, go for the upper limit. If you cannot, then there are several ballpark figures to ensure that you are not under-insured. For a child under 25, the most common purposes for which claims are made are medical conditions arising out of colds, fevers, and fractures, for which Rs 75,000 is proposed. This figure would vary from hospital to hospital.
The age group of 25- 35 commonly reports to the hospitals for infectious diseases and injuries, and a minimum sum assured of Rs 2 lakh would cover most expenses. From 35 onwards, things start getting dicey with heart problems and diabetes creeping in. A minimum sum assured of Rs 3 lakh is advised.
Currently, people under the age of 45 can get insured without having to undergo a test, although there is a move to bring this age down to 35. After 45, industry sources say that one should avail the maximum of Rs 5 lakh, and even take multiple policies to cover oneself if there is a family history of genetically passed illnesses. The 45-plus age group have commonly been treated for hypertension, diabetes, kidney stones, knee transplants and cancer. The range for the annual premium is vast and varied. It starts from a minimum of Rs 213 per year for a person less than 35 years of age with a sum assured of Rs 15,000. This could go up to Rs 17,156 per year for someone over 76 years who is renewing an existing policy for Rs 5 lakh. It may sound expensive, but it should always be looked at as a cost in proportion to the total sum assured. This cost ranges from just under 1% in some cases to around 2.5% in cases of elders. Industry people put it this way. If you think spending 1% of the sum assured on health is expensive today, what will you say if you have to shell out the entire 100%, without an advance notice?