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INDIA has arguably one of the best private healthcare services in the world, offering probably the best value for money for these services. And yet, despite the fact that the services and facilities offered by the state are far below what would be considered acceptable and that the cost of private healthcare is beyond most Indians, few have taken any kind of insurance cover. Most people seem to hope that they won't ever need medical treatment, but if they do have a medical event in the family and elect for private healthcare, then they are obliged to dip into their savings or take loans, which are not ideal solutions. Or they end up making use of the overcrowded, under-resourced and poorly-maintained state facilities, which is seldom a pleasant experience.

However, for those whose employers offer health insurance or who are responsible enough to take it themselves, the situation isn't much better. Medical insurance products are baffling and it's hard to tell the different features that the different products offer. It looks great from a highlights package point of view, with overall cover for a family of four extending to Rs 6 lakh, but it's different in the detail. A number of medical conditions are excluded and insurers impose limitations in terms of what they will pay for other conditions. Also, what the insurer pays, if at all, does not necessarily bear a resemblance to the cost of the actual services incurred, meaning that in many instances, people who thought that they had insurance cover find themselves having to pay for the services from their own pockets anyway.

There is a complete breakdown of the relationship of trust that should exist between an insurer and the insured. A lot of people seem to want health insurance after they fall sick, which is like wanting house insurance once you've been robbed. The idea of insurance is to assist you with unexpected events and costs, not ones you can anticipate. Insurers don't seem to want to pay what the glossy brochure or the slick TV ad seems to promise, and rely on a volume of fine print to escape liability. The use of third-party administrators (TPA) muddies the relationship between the insured and the insurer, with the TPA often having perverse incentives not to pay claims that are legitimate.

Despite the playing field being tilted in their favour, insurers lose a fortune on the health book, with loss ratios of 150% not being uncommon. This is because the products are not properly priced and not marketed to a diverse risk pool. The thinking seems to be that the company will sacrifice underwriting profit for market share and health policies are sold as a loss leader.

Plainly, this situation is not sustainable. Economic reality will eventually force the insurers to increase the cost of the cover and the first result of that action will be all of those who consider themselves low risk, because they are young and healthy, to lapse their cover. A death spiral follows, with less and less cover costing more and more, and only those with desperate medical needs seeing any value in continuing to pay their premiums.

Several things are needed to address the situation. Products must be able to add value to people who traditionally don't see a need to buy health insurance. Young and healthy buyers are essential to make the risk pool sustainable, but having any kind of mandatory insurance raises all sorts of political and economic issues. So, the product itself must attract the healthy buyer by means of adding value outside of health insurance. It could be linking it to car or phone insurance, or having a noclaim bonus so that the premiums are not perceived to be wasted. Right now, there is no innovation.

The products need to be simplified and more certainty around the extent of the cover needs to be created. The insured need to know at the time of purchase what is covered and what is not, including any kind of pre-existing conditions. Trust needs to be earned, and controls put in place to prevent fraud or abuse.

The bureaucracy needs to be simplified. While regulation is important to ensure vulnerable sections of the population are not taken advantage of, players should be allowed to introduce products that will increase the number of people who have access to healthcare cover. While the Irda's mandate is to increase market penetration of insurance cover, the fact is that red tape ties everyone's hands.

Right now, there are enormous opportunities to make an impact in the health insurance market, making a huge difference to the lives of ordinary citizens. But with inflation limiting the discretionary spend of many people, insurance products are going to have to demonstrate greater value before there is a greater acceptance from the market.

i) In India, one of the world's best private healthcare service has not been able to attract citizens to take health insurance

ii) Careless citizens, insurer-insured mistrust and fine print serving as an escape route are responsible for this scenario

iii) Value addition, simple products and removal of red tape can convince more citizens to go for health insurance

Source :http://epaper.timesofindia.com/