Are You Worse off with Health Insurance?

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You will be amazed to know that individuals who purchase health insurance are the worst off in our country, particularly if they have purchased their insurance plans from stand-alone private insurers. They face huge problems in getting payments from these companies whenever they urgently require coverage. The complaints rate in the Indian health insurance industry is also the highest as per studies which have taken into account California, United States, United Kingdom, Canada, India and Australia.

This goes to show the poor quality of the insurance services and products on offer here. Studies have also indicated that households in India which do not buy health insurance are better off as compared to those households that buy the same, going by the poor customer protection levels. While private insurance companies do not have a good track record with regard to paying claims, the current regulations do not come with penalties for the rejection of claims which are valid even when the rejections are themselves violating the regulations. A NIPP (National Institute of Public Finance and Policy) study named Fair Play in Indian Health Insurance, clearly stated that the ratio of claims or amounts paid out for the settlement of claims as a percentage of the total collection of premiums came down to 58% from 67%. This decline was observed between the years 2013 and 2016 as per this study in case of private stand-alone companies which give rise to grave concerns about the extent of consumer protection.

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However, there is no provision in India for making it compulsory for insurance companies to offer refunds to customers in case the claims ratio is lower than a minimum level unlike the United States. The minimum claims ratio usually hovers between 65-80% in several states in the US. Anything lower than this will mean that companies have to offer refunds to customers. A highly contrasting picture is obtained when one sees that between 2013-14 and 2016-17, the claims ratio went up to 117% from 106% in case of government supported general insurance entities. This indicates businesses about to be bankrupt or cross-subsidies coming from other operations.

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This study also discovered that a higher percentage of customer premiums are used by private insurance companies for paying the commissions of agents. This increased to 12% from 10% between 2013-14 and 2015-16. Public sector insurance companies paid 6.8% in the year 2013 and this has increased to a little more than 7% at present. The GFHIS (Government-funded health insurance schemes) have witnessed rapid growth, extending to more than 20% of the country’s population by the year 2015-16 from 12% in 2013-14. These schemes make it possible for people with lower incomes to access private hospitals in case of medical treatments and the insurance company settles the bills accordingly. Group health insurance is provided to employees by their companies and this covered only 4% of the total population as per the study while individual insurance coverage for the population was just 2%.

The authors of the study stated that there was a pressing need to analyse the overall quality of insurance policies being offered and the sector’s efficiency. This becomes all the more necessary with governments launching insurance schemes which collaborate with private health insurance companies and individuals also buying from these private insurers. The study took into account complaints that were made to adjudicators from outside the company which indicates that the insurance companies did not successfully take care of the grievance of the customer. Additionally, in several other countries, medication, clinical visits and other wellness procedures are covered along with hospitalization, there were higher chances for overall dissatisfaction of customers. In spite of insurance in India covering only hospitalization needs and there being a lower trait of litigation here, the complaints rate is still the highest.

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The study opined that there is no fair play in this sector and this comes from poor law enforcement, regulation based deficiencies and poor institutional frameworks for redressal of consumer grievances. Legitimate customer claims were rejected several times by insurance companies although they eventually lost in consumer courts and ombudsman related redressal mechanisms. In several cases where dispute resolution procedures have taken place, the company has to pay only smaller values for harassment damages and costs of litigation along with the insured amount. The costs that are imposed are mostly lower than the time value of the amount that has been claimed as per the study. Rejecting claims which are legitimate also helped augment the surplus funds of private insurance companies according to the study.

In case your legitimate insurance claim was rejected; you can reach out to Insurance Samadhan. Our experts from the insurance industry will represent you with the insurance companies and will help you to find adequate redressal for your grievances.

Shailesh Kumar

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