Prajna Capital

Health Insurance - A must-have for every individual

Posted: 14 Mar 2014 11:31 PM PDT

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We are sure you all agree that medical expenses have been continuously escalating. While dealing with the stress of poor health is itself harrowing, exorbitant medical bills can give you sleepless nights. A health insurance helps you mitigate the financial pressure by paying for your hospitalisation expenses. However, the multitude of options available in the market, offered by both public as well as private players, often leaves one confused as to which policy to choose. Individuals sometimes make a wrong choice by choosing a policy for which they may be paying a huge amount, but which may not even cater to their needs.

What to look for in a Health Insurance Policy?
One of the important things to look for in a health insurance policy is the age till which you can renew the policy. The higher this is, the better it is for you; as healthcare costs tend to increase with an increase in age. You should also look for the limits on expenses and co-pay clause. The more the sub-limits, the more detrimental it is to you. Most private players do not have expense limits. While premium should not be the sole consideration factor, it is needless to say that you should not end up paying abnormally high premiums for a low coverage. Hence zero in on the coverage you need, keeping in mind the needs and size of your family and also your premium paying capacity.
Before choosing your policy, it is also important to consider the claims settlement history of the insurer. According to policybazaar.com, Oriental Insurance Company, New India Assurance and Bajaj Allianz had high claim settlement ratios of 92%, 89% and 84% respectively in the second quarter of 2011, while Star Health, ICICI Lombard and Max Bupa had low ratios of 61%, 65% and 65% respectively during the same period.

Important parameters in a Health Insurance Policy:
Age of insured: As mentioned earlier, the maximum age of entry and the renewal age are critical aspects, as healthcare costs shoot up after you become 60 years. The policy by United India Insurance has the highest renewal age of 80 years, while ICICI Lombard has no limit on the entry age and renewal age. New India Assurance Company has the lowest limit on entry age at 60 years.

Sum assured: You have to decide the coverage you require based on the number of members in your family, as well as your family needs. In today’s scenario, a family coverage of even Rs. 5 lakhs or Rs. 10 lakhs looks low. However, most companies offer a maximum Sum Assured of Rs. 5 lakhs only. Few companies like Apollo Munich and Star Health offer coverage upto Rs. 15 lakhs. Max Bupa has policies with a Sum Assured value of upto Rs. 50 lakhs, which has a very high premium of nearly Rs. 1 lakh per year. Therefore you must choose your coverage based on your premium paying capacity as well.

Premium amount: Most companies offer premium based on the age of the insured. We analysed premium amounts for 10 companies, for an individual aged 35 years, his spouse and 2 dependent children, for a Sum Assured of Rs. 5 lakhs. It was found that the premium was lowest for United India Insurance and Oriental Insurance at Rs. 8,971 and Rs. 8,120 (silver plan), while, it was the highest for Max Bupa (Rs. 20,716).

Pre- and post-hospitalization time period: Generally, companies cover medical bills for 30 days before the hospitalisation and 60 days after the hospitalisation. However, for HDFC Ergo and Bajaj Allianz, the number of days read higher at 60 days and 90 days respectively. Apollo Munich offers a higher time period coverage at 60 days and 180 days for pre and post-hospitalisation. Understandably, the higher the time period covered, the better it is for you.

Sub-limits and Co-Pay: Sub-limits mean expense heads have a capping, and you will have to shell out beyond this limit from your pocket. Expenses limit are more stringent in Oriental Insurance. There are no sub-limits in ICICI Lombard, Apollo Munich, HDFC Ergo and Reliance. Co-pay requires you to bear a part of the claim, while the insurer will only consider, say 80% or 90% of the amount claimed. This is usually characteristic for claims of people beyond a particular age. Companies like United India Insurance, Oriental Insurance (silver plans), Max Bupa, Bajaj Allianz and Star Health have this clause. If you fall under their criterion for determining Co-Pay, it is better to avoid such policies.

Major Exclusions: All policies give a list of items which are specifically excluded from coverage. All pre-existing diseases are generally excluded for a period of 4 years from the policy start date. Policies also specify an initial waiting period of 30 days (90 days for Max Bupa), during which all diseases are excluded. Understand exclusions and see if you may need any of those exclusions in future (eg; maternity benefits); if yes, it is better to avoid such a policy.

Additional benefits: It is best to choose a plan which is comprehensive and covers the maximum risk possible. Even if the sum insured is the same, there are other benefits you must check, which include OPD cover, maternity benefits, personal accident-death benefits, health check-up and domiciliary hospitalization benefits. Maximum benefits are available in Reliance, Apollo Munich, HDFC Ergo and Max Bupa. While maternity benefits are available in Max Bupa and HDFC Ergo, day-care treatment is available in New India Assurance, Max Bupa, Reliance, ICICI Lombard, Star Health and Apollo Munich. Some policies like Apollo Munich and Star Health restore your Sum Assured to the original levels, even if you claim this amount during the year. No-claim bonus is available in United India Insurance, Reliance, New India Assurance, Star Health, Apollo Munich, ICICI Lombard, Bajaj Allianz and HDFC Ergo.

Health Insurance - Which policy to choose and which not to?
We have analysed health insurance products of 10 companies on the basis of several parameters. United India Insurance and Oriental Insurance can be chosen for the high entry age and low premium. However, these policies are plain-vanilla and do not have much added benefits. If you wish to stick to a low premium, these two policies are ideal. You can also look at Bajaj Allianz as premium is low and historical claim settlement ratio is high. If you do not mind paying a slightly high premium, you can look at Apollo Munich, as the policy offers several benefits and is a comprehensive one. Same is the case with Reliance. Star Health can also be considered for its benefits and low premium; but beware of the historical low settlement ratio.

Policies like New India Assurance and ICICI Lombard can be avoided as the premium paid is high compared to the benefits offered. Max Bupa and HDFC Ergo have very high premiums in our comparison set, and hence may be avoided, even though these policies offer some good benefits.

A detailed comparison is available below. If you prefer to download the excel file. For more details, refer to individual company’s prospectus. Kindly note that this analysis covers offerings from major insurers only & this is not an all-product comprehensive comparison. The analysis is valid on the date being published.

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