Encourage customers to stay invested for the long term
Mr. Puneet Nanda, Executive Director, ICICI Prudential Life Insurance, discusses the advantage of buying health insurance plans from life insurance companies and staying invested in them for the long term.
Why are more and more life insurers looking to get into the health insurance space?
India has a growing number of young working individuals. Their lifestyle is one that can be described as having four “Rises”. Rising aspirations, rising incomes, rising consumption and rising stress. Their fast-paced professional lives coupled with neglect towards healthy dietary habits is leading to an increase in lifestyle-related ailments. Clearly, all of us need to equip ourselves to not only avoid such lifestyle-related ailments but also to prepare ourselves financially in case we were to be affected. This is where health insurance has a huge role to play.
Within health insurance, we believe there is a differentiated proposition that life insurance companies can offer. This is the category of products in which the customer gets a lumpsum benefit and not the reimbursement of medical expenses incurred. This segment is gaining popularity due to its greater relevance for customers.
A financial plan should not just be about meeting the cost of treatment but should also take into account other aspects such as potential loss of income, other incidental expenses, etc. This is where having a lumpsum benefit plan offered by life insurers helps.
Last but not the least, it is estimated that only 20 per cent of women and 23 per cent of men in the age bracket of 15-49 years are covered by health insurance as per a survey conducted by National Family Health Survey. The vast distribution network and digital platforms built by the life insurance industry can be used to ensure that the coverage of health insurance increases manifold.
How do the products offered by the life insurance companies differ from the ones that are provided by health or general insurers?
There are three principal differences: The first difference is in the amount which gets paid to the policyholder. In a typical health insurance plan offered by a standalone health or general insurance company, the policy reimburses the medical expense incurred. Other incidental expenses may or may not be covered as a part of the benefits. However, health insurance plans offered by life insurers pay a lump sum benefit which the customer can use not just for medical treatment but for any other expense that may come up. So, travel expenses, post-surgery medical care, temporary loss of income – all of these are expenses that can be met by the customer because of the lumpsum benefit which is paid out upfront.
The second difference is the timing of the benefit payout. The unique feature of health insurance plans offered by life insurers is that the amount is paid on diagnosis of the medical condition and not after the medical treatment has been availed of. Paying the benefit upfront, gives the customer the flexibility and peace of mind to choose the best treatment.
The third difference is in the place of treatment. Typically, a health insurance company will have a tie-up with a network of hospitals. For a customer to avail of the policy benefits, the treatment will have to take place within this network. Whereas, in the lumpsum benefit plans offered by life insurance companies, the customer can choose the place and course of medical treatment as per his/her preference. In short, the life insurer will pay a fixed sum which the customer can use in any manner which he/she deems appropriate.
Some life insurance companies also offer products which come with an add-on benefit called income replacement which provides a certain percentage of the insurance cover as monthly payment to the customer. This can help offset any temporary loss of income which a customer may have to face, while undergoing medical treatment.
What role will the private sector play in the National Health Policy announced by Arun Jaitley in Budget 2018?
It is a laudable initiative by the government to make health insurance available to all especially the disadvantaged and vulnerable section of society.
To ensure a wider coverage of health insurance, insurers with the digital platforms, on-ground distribution and service network can play a pivotal role. Another aspect is that industry could simplify products and make it easy to purchase and use.
What steps need to be taken to increase insurance penetration?
First, the industry should focus on making its products simple to understand. Second, the on-boarding part details the customer needs to submit, documents need to be collected needs to be made effortless for the customer. Insurers need to focus on collecting data seamlessly and make the process paperless, to whatever extent possible.
Third, today’s customer has a very high level of service expectation. Insurers, and the larger financial services industry, needs to recognise this and keep ahead of the customer’s service expectations.
One of the recent success which highlights the power of these three points is the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). Within a short span of time, approximately 3 crore policies were issued on the back of an extremely simple offer made available via SMS. That’s the lesson which insurance companies should take away from this.
Instances of frauds are on the rise. How do insurance companies plan to address this?
To mitigate the risk of frauds, insurance companies are working on establishing triggers / red alerts for early detection of frauds and corresponding action.
While customers are showing greater awareness, it is important that the insurance industry continues to educate customers on the benefits of insurance. We need to promote the concept of human life value to help customers answer the question of what is the ideal quantum of life insurance cover they need.
We also need to encourage customers to stay invested for the long-term because that is when they can reap the benefits of the savings plans.