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5 health insurance changes you must know

admin — Thu, 17 May 2012 06:26:49 +0000

Thanks mainly to new bunch of health insurance players, things are changing for the better for customers. Be it customer-friendly features, service standards or claim settlement experience – some companies are going all out to please their customers. It remains to be seen if others would join them. But, for the time-being, it is advantage customers, at least in certain areas. Here are some pro-customer steps that the individual health segment has seen in the recent past:

Life-long renewability

With the IRDA refusing to approve new products with a cap on the exit age, most companies have been forced to rejig their product structures to offer life-long cover. However, this move will not benefit the existing policyholders who may have suffered the agony of seeing their renewal request turned down at a time when they need it the most, despite having paid premiums for years. Yet, it is a significant step, as it will shield newer policyholders from such unjust treatment by companies.

Sub-limits out of favour

For long, policyholders have had no choice but to buy policies that incorporate sub-limits, or restrictions within the sum insured, on room rents, doctor’s fees, operation theatre charges and so on. Now, companies like Apollo Munich and Tata-AIG have abolished such caps, paving the way for smoother claim settlements sans disputes.

Claim loading gives way to no-claim bonus

Again, some new-age health insurers have chosen not to impose premium hikes merely because of claims made in the previous year. The loading structure is considered unfair by many as it penalises policyholders for taking the very step they have bought the policy for. This apart, some insurers have begun shifting focus from such prohibitive tools to a friendlier practice of offering incentives by way of no claim discounts to ensure effective claim management.

Zone-based premium structure

It is well-known that healthcare expenses in metro cities are far higher than those in smaller towns. In spite of this, those residing in comparatively smaller towns are forced to pay premiums comparable to metro-dwellers. Perhaps to correct this anomaly, companies like New India Assurance, Bharti-Axa and L&T General have come up with zone-based premiums, where residents of smaller cities and towns are offered the choice of paying lower premiums. However, if they decide to undergo treatment at a hospital in a metro (or a city outside their zone), they will have to shell out a certain pre-decided proportion of the claim before the company contributes its share.

Cover replenishment

An innovative feature, it is part of certain policies offered by Star Health, L&T General and Apollo Munich. Essentially, they offer to restore your sum insured if you happen to use up the entire cover in a year. However, there are riders. For instance, L&T’s product promises replenishment only in the event of the subsequent claims being related to accidents. On the other hand, the clause will get triggered in Apollo Munich’s policy upon any ailment or condition, provided it is not related to the claim made earlier in the year

[Source - ET]

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Insurers scrap sub-limits in health policies

admin — Fri, 27 Apr 2012 06:13:02 +0000

Two years after introducing sub-limits in health insurance policies, non-life insurers are now deleting the clause from new plans to attract retail customers. Sub-limits imposed specific restrictions on room rents, doctors’ fees and operation theatre charges.

They were introduced to cut losses in the health insurancesegment. Industry executives said Apollo Munich and Tata AIG General have removed sub-limits from new health insurance products, while other non-life insurers are contemplating a similar move.

But, for group insurance policies, such limits will continue as these policies cannot have unlimited benefit, industry executives said. “More companies are looking at each line of business separately without cross-subsidy,” said Antony Jacob, MD & CEO, Apollo Munich, a standalone health insurance company. Tata AIG’s MediPrime and Apollo Munich’s Optima Restore are the recent products that have done away with sub-limits.

Earlier, insurance firms had introduced restrictions on different claim categories within a policy to cut losses in the health segment, particularly group policies. The average industry claim ratio, which is the claim paid versus premium earned, in retail health insurance is nearly 60-70 %. For every Rs 100, the industry pays claim of Rs 60-70.

For group policies, the insurer pays more than Rs 110 against Rs 100 earned. “Companies are trying different price points. Premium charged on products without sub-limits and co-pay is 15% higher then those which have limits across the country,” said Rahul Agarwal, MD & CEO, Optima Insurance Broker.

“Retail health market is very lucrative. Also, fraud management has become better with monitoring of claims online,” he said. Some insurance companies have started in-house third-party administrations to monitor claims and bring down the cases of loss and claims.

The segment is growing at 25% to 30% on a year-on-year basis. Retail health insurance contributes more than Rs 5,000 crore to the income of the industry while the size of the industry is Rs 12,000 crore.

Group business comprises a large chunk of health insurance. Also, in a bid to attract policyholders, insurance companies are offering covers for alternative treatments such as unani, ayurveda and homoeopathy. The regulator has formed health insurance forum to discuss the issues in the segment with different stakeholders.

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Insurance is for protection, not wealth creation

admin — Wed, 25 Apr 2012 06:40:47 +0000

Life Insurance has been invented by the society as a financial tool for creating a corpus to be utilised when financial support or protection is needed the most in someone’s life. Insurance, therefore, is very different from savings, banking, and investment.

Any insurance scheme or policy is based on the principle of mutual pooling of small amounts of money by large numbers of people; using the amount for those few unfortunate members of the society who suffer financial loss or loss of financial support because of some tragic event. Insurance helps in recovery from an unfortunate situation; takes away stress from the social fabric; and helps the affected person in bringing life back to normalcy at least financially.

With the very first installment of premium paid to a life insurance company, the policy holder makes sure that the family acquires an umbrella of financial protection which is guaranteed to the family in the event of the unfortunate demise of the policy holder. It is, therefore, rightly said that there is no substitute for life insurance.

The wealth that it creates with very small amounts paid as premiums guarantees a decent life to the dependents; higher education to children; and even marriage or other important functions in a manner that would fulfill anybody’s dream.

In fact, those who seek investment-oriented benefits from life insurance end up with inadequate sum assured when it is needed the most and they lose the basic benefits of insurance planning. Those who look for investment through life insurance may consider it at a later stage of life when sufficient savings have already been made over a period of time; but those who are in the early years of their earning life, need to focus on the insurance component of life insurance products.

There are so many other financial tools available which can guarantee medium-to-high returns over a period of time, but they cannot guarantee payment of a huge lump sum amount matching with the requirements of the dependents on payment of a few installments of premium which sometime may not be even 5% to 10% of the benefit received.

About a decade back, when the unit-linked insurance plans (Ulips) were introduced to the market in a big way by new life insurance companies, there was a sudden inclination on the part of the prospective policy holders to buy Ulips with a view to maximize return on the premium amount paid by them.

Over a period of time, Ulips became the favourite of the market and gradually the investment return started influencing the product design and development, marginalising the insurance component. Some products provided very negligible life insurance cover but focused on market linked returns. As a result, there has been substantial downsizing of the sum assured vis-a-vis total number of policies sold and it has finally resulted in massive erosion of life insurance protection, which was the very purpose of selling or buying of life insurance.

However, of late, there has been realisation on the part of the insurance regulator as well as the insurance companies for firmly dealing with this aberration and bringing back focus on the insurance component of the life insurance policy. Insurance companies, existing and prospective customers are slowly moving towards a more balanced view of the purpose and benefits of life insurance.

A person looking to buy life insurance should therefore, first look for adequacy of risk cover in the product and then choose a particular plan according to other features available with different products of different companies. Life insurance is for ensuring peace of mind and not for pieces of dividends and interests.

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General insurers clock a 23% growth in premium income during FY-12

admin — Fri, 20 Apr 2012 06:45:42 +0000

The 24 general insurers have collective clocked a premium income growth of 23.16% during the year ended March 2012. The private companies have managed a 25% growth while the four public sector companies have registered a 22% growth in premium income.

The industry as a whole clocked a total premium income of Rs 58344.16 crore during the period, against Rs 47373 crore in the previous period. The figure for the public sector companies taken together was Rs 34114 crore during FY12 against Rs 27991 crore in FY11.

The private companies collectively clocked a total premium income of Rs 24230 crore during the year ended March 2012 against Rs 19382 crore in the previous financial.

Health insurers - Start Health & Allied Insurance, was the only company that saw a fall in premium income during the period. The company witnessed a near 7% fall in premium income during the period.

The highest growth in premium income was registered by L&T General Insurance. The company saw premium income grow 7 times mainly because it is a relatively new company and its base was small.

Its premium during the previous financial was Rs 17 crore which touched 143 crore during the period under review.

New India insurance remained the largest insurer with a total premium income of Rs 8536 crore during the period. This was a 20% growth over the previous fiscal when the company earned a premium of Rs 7097 crore.

ICICI Lombard remained the largest insurers in the private sector with a 21% growth and a Rs 5150 crore of premium income.

[Source - ET]

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Bharti AXA aims to double its business in south by year end

admin — Thu, 19 Apr 2012 06:01:19 +0000

Private insurer Bharti AXA General Insurance is planning to double its business in the southern region by the end of the ongoing calendar year.

“The company is planning to double its business in the southern region by the end of the calendar year 2012,” the company said in a release today.

The general insurer, which has a premium collection to the tune of Rs 774 crore during April-February period, receives around 23 percent of the total premium from the southern region of the country.

According to the company, while western region contributes around 36 percent of the total premium, northern zone provides 35 percent and eastern zone’s share stands at six percent.

The insurer is also planning to increase its premium collection volume from Visakhapatnam of Andhra Pradesh.

“South India is a key focus market for us & Vizag being one of the biggest cities in South India is very important for us. We are looking at fuelling our growth by creating awareness about the need for insurance in this region,” Chief Executive Officer and Managing Director of Bharti AXA General Insurance, Amarnath Ananthanaryanan said.

The company is hopeful of posting a growth rate of 45 percent in its gross written premium collection in the current financial year.

Bharti AXA General Insurance is the joint venture between Bharti Enterprises and AXA group in which 74 percent stake is being held by Bharti group.

AXA group, which is a global player in insurance and asset management, had grossed revenue to the tune of 91 billion euros in 2010.

[Source - ET]

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Irda bats to make life products tax-efficient

admin — Wed, 18 Apr 2012 10:47:10 +0000

The Insurance Regulatory and Development Authority (Irda) has asked the finance ministry to ease conditions for availing tax benefits on life insurance policies.

The regulator wants the removal of the current rule of linking tax benefits with premium to sum assured ratio.Under this, a policy holder gets tax deduction under Section 80C only if he goes for a cover that is at least 10 times the annual premium paid, or if premium does not exceed 10% of the sum assured.

Irda has proposed that the tenure of the policy should be taken into consideration for assessing tax rebate, instead of the life cover and premium amount.

“We have asked the finance ministry to consider the recommendation on availing tax benefits for all products approved by Irda. When it comes to taxation, the tenure of the policy should be taken into consideration.Policies that have tenure of more than 10 years should be considered as long-term policies, while those having tenure of less than 10 years should be considered differently from a taxation perspective,” J Hari Narayan, chairman, Irda, told DNA.

The insurance watchdog, after taking into account views of all life insurers, has presented the recommendations before the finance ministry. The finance minister, in turn, has said he will forward industry’s concern to Central Board of Direct Taxes.

The sum assured requirement was doubled to 10 times the annual premium paid in the Union Budget with effect from April 1, apparently in order to goad people to opt for higher cover.

Life insurers are also concerned that the stipulation where tax benefit would be not be given if premium paid exceeds 10% of the sum assured would make people in higher as brackets ineligible for the benefit.This is because as the age goes up, people need to shell out higher premiums due to high mortality risk, which may breach the 10% limit.

SB Mathur, secretary general, Life Insurance Council, said, “Any life insurance product by the regulator should be eligible for tax deductions. The linkage between sum assured and premium is obsolete and will end up penalising people who are in the higher age bracket or do not have regular income, and should therefore be removed.”

While some insurers expect a change to be made, others are not so hopeful. If the finance ministry decides to make any change in the rule, it will be announced in the Finance Bill, which is set to be tabled in this Parliament session. Till then, it’s wait and watch for prospective policyholders.

[Source - DNA]

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Life cover policy forms to be more interactive

admin — Tue, 17 Apr 2012 10:57:10 +0000

Those applying for life insurance policies may have to disclose not only their health and family details, but also state what they expect out of the policy.

To prevent cases of agents pushing policies carrying higher sales commissions to uninformed buyers and themselves filling policy details, the Insurance Regulatory and Development Authority (Irda) wants buyers to provide details of what they expect as death maturity benefit, pension benefit or investment returns.

Irda is looking at prescribing a standard proposal form for individual policies for all life insurance companies with a section on ‘needs analysis’. The new regulations planned will require insurers to have in place “a process and system to assess the ‘needs analysis’ carried out for each and every proposal received and the soundness of a recommendation about a particular product.” According to the new draft guidelines, an agent or a broker has to make a declaration that the product he has recommended is suitable for the buyer based on the information submitted by the latter.

The buyer too has to provide an acknowledgement that the agent or broker explained the features of the policy and that it suits his/her needs.

“Asking for these details from educated people or those buying high premium policies would justify the efforts. But most life insurance policy premiums are in the range of Rs 1,000-3,000 with sum insured of Rs 10,000 or so. Players like LIC sell a huge number of such policies in the rural region. It would be logistically very difficult to fill and provide all these details. We have requested the regulator to set a bar of Rs 50,000 annual premium for providing such details,” S B Mathur, secretary general, Life Insurance Council of India, told Financial Chronicle.

The Insurance Regulatory and Development Authority (Irda) has sought feedback on the draft regulations by May 15. The draft is based on a June 2010 discussion paper.

[Source - mydigitalfc]

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Will your insurance policy get tax benefits

admin — Mon, 16 Apr 2012 06:17:35 +0000

When this year’s budget laid down new rules for life insurance, it was presumed that mis-selling would lose its sting. Far from it, mis-selling has now become more dangerous for your finances.

Till 31 March, if someone was mis-sold an unsuitable life insurance policy, the most he would have lost was the liquidity and the opportunity to invest in a more lucrative avenue. But at least he got the tax benefits-tax deduction of the premium under Sec 80C and tax-free income on maturity under Sec 10(10D).

Now, if a buyer is not careful, he may end up buying a policy that won’t offer any tax benefits. Even the money received by his nominee in case of death will be taxable if the policy does not cover the buyer for 10 times the annual premium.

Individual agents as well as aggregator sites are happily selling insurance policies that are not eligible for tax benefits. Till last week, a prominent insurance portal was hawking Jeevan Vriddhi, a single premium plan from LIC that covers the buyer for 5 times the premium. Posing as a buyer, ET Wealth called up the portal and was given the assurance that the policy will offer the tax benefits under Sec 80C and Sec 10(10D).

Insurance agents also have their hands in the till. They are bombarding buyers with attractive benefit illustrations without educating them on the post-budget tax implications. An agent of a private insurance company approached us with an endowment insurance policy that offered a cover of 7 times the premium.

It is by itself a good plan because it offers the option of a whole life cover as well as term cover and accidental death riders. But the five-year option that he was trying to sell is not eligible for any tax benefits and he was oblivious of the fact. When this was pointed out to a senior official, he mumbled that the company will soon be conducting training sessions on the changes in the rules.

To ensure that companies don’t design products to circumvent the rules, the budget has clarified that the cover shall not include bonuses and other payments made by the company. Only the basic sum assured will be taken into account.

The budget has also mentioned that the cover should remain at least 10 times throughout the tenure of the policy. This means that plans in which the cover comes down from the second year onwards will also not make the cut.

If you are planning to invest in a life insurance policy, make sure it complies with the new eligibility norms for tax benefits. The base cover offered by the policy should be at least 10 times the annual premium. For instance, if the premium is Rs 12,000 a year, then the cover should be at least Rs 1.2 lakh.

Two weeks back, Finance Minister Pranab Mukherjee had asked the Insurance Regulatory and Development Authority to take strict action against companies that are mis-selling insurance. The truth is, companies don’t mis-sell-their agents and advisers do.

The problem is that companies don’t actively discourage the mis-selling and errant agents usually get away with a mild rap on the knuckles. Insurers will have to take stricter action against mis-selling. If they do not take corrective measures now, in a few years Irda will be inundated with mis-selling complaints from taxpayers who have been denied tax deduction and exemption on their investments in life insurance.

[Source - ET]

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Good policy communication is responsibility of insurer: IRDA

admin — Sat, 14 Apr 2012 06:25:47 +0000

Faced with large number of complaints against non-life insurance companies, the regulator IRDA today suggested making the common people understand the policy by simplifying the language.

Speaking at the first meeting of newly-formed Health Insurance Forum, IRDA Chairman J Harinarayana said they received 92,898 complaints in the non-life sector, of which 38,891 or 37.48 per cent were with regard to health insurance.

“Probably the lack of clarity in communication is reflected in the form of increasing number of complaints. Therefore, good communication is the responsibility of the insurance company and not with the policy holder.

“So, if he does not understand something, some aspect of the policy, the problem lies with the insurance company and need to be addressed,” Harinarayana said.

“We should look at the question of the language. Whether the usage of local language would help or is the nature of the language itself including the construct of the language has to be changed,” he added.

He said insurance companies should treat the complaints as consumer feedback.

Replying to a query on the health insurance portability, the regulator said, there not much of portability or shift among insurance companies.

“All companies are equally good or equally bad. There is not much to chose. This is what the customer feels,” he quipped.

Speaking about the Health Insurance Forum, Harinarayana said, this forum will transform into a self regulatory body much in lines with life council and non-life council.

[Source -ET]

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Irda for state-backed health insurance scheme

admin — Fri, 13 Apr 2012 06:03:11 +0000

The Insurance Regulatory and Development Authority (Irda) has strongly come out in support of an upcoming government-backed health insurance policy aimed at providing health cover to a large population of the country.

“Why not has state-backed health insurance coverage for people when practically all the governments in the world have similar coverage for their citizens,” asked IrDA chairman J Hari Narayan. He was referring to a meeting of a group of experts in the Planning Commission today on the new health insurance scheme which is in the works.

Stating the cover could be on the lines of the Rashtriya Swasthya Bima Yojana, he said Irda had to see the contours of the scheme once it was ready. A government-backed health scheme involved risks, too. “One such could be that the pricing may go up,” he said, while addressing the launch of Health Forum, a self-regulatory body that IrDA constituted to address the issues of the health insurance sector.

According to the Irda chairman, government-sponsored health insurance schemes provide cover at various levels to 189 million people, while the non-government sector covers 22 million people under group schemes. Seven million people are covered under individual policies. Per capita pricing of these policies stands at Rs 110 in government schemes, Rs 219 in group health insurance schemes and Rs 5,500 in individual policies.

Though the per capita price is lower in government schemes, they are more efficient in terms of loss ratio, especially those underwritten by public sector health insurance companies. The health insurance sector in the country is growing at 45 per cent annually, and would soon touch Rs 35,000 crore in business this year, Narayan added.

Irda will notify a comprehensive health insurance regulation after taking into account the issues of non-standardisation of procedures, coverage of patients with HIV/AIDS and mental illnesses and the prospect of the bringing Ayush (alternative medical systems) into health insurance. “We will bring the regulation after the Health Forum takes a look at it, and comes up with its recommendations,” the chairman said.

The consultative body includes General Insurance Council (non-life), Life Insurance Council, multi stake holder groups of Federation of Indian Chambers of Commerce and Industry and the Confederation of Indian Industry, besides the Health Forum formed with the representatives of health insurance companies, third-party administrators, hospitals and other stakeholders.

Narayan came down heavily on unviable methods adopted by companies, especially in group schemes, saying nothing prevented Irda from taking action against such practices. “So far, we have maintained a restraint, which will not last forever,” he said, stating the regulator might prohibit companies from marketing such products.

Referring to rising complaints from policyholders in the health insurance sector, he said unhealthy pricing practices had been putting a lot of stress on the management of the companies, leading sometimes to refusal of the claims. However, he ruled out prescribing the pricing either of policies or of healthcare services — and said it was up to the companies and the self-regulatory body to handle the issue.

The loss ratio in group health insurance schemes ranges from 94 per cent to 112 per cent, while Irda maintains the ideal loss ratio should be around 75 per cent. Individual policies that command a per-capita premium of Rs 5,500 has a loss ratio of just 40 per cent.

[Source - BS]

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