INDIA: No More Medical Insurance For Over 55s?

How can insurance companies meet the needs of the elderly? India should take a closer look at how countries such as Chile address this, writes Cyrus Parvi. MUMBAI (Financial Express), July 28, 2006: Over 55? You may not get a mediclaim policy. This headline in a leading newspaper brought out frowns on faces of those people who have spent their live ensuring that we smile. A genre which we dotingly call our nana, nani, dada, dadi; our ‘elders’ or our ‘senior citizens’. Insurance companies contend that ‘Medical insurance’ is one portfolio that is most unprofitable and which is actually bleeding insurance companies. The claim ratio in India is the worst as compared to most developing countries. On the other hand, elders argue that when they have been paying premiums for these policies for the past so many years when they were of better health and the claim ratio is not so bad how can insurance companies not renew the policy once they cross the threshold age limit. Further, if insurance companies do not cover this risk then who will? Whom do they turn to when they require medical assistance? Insurance companies made their profits when the claim ratio was low so is it now fair that they are not very keen on underwriting policies once the threshold age limit is attained. This dichotomy needs to be resolved.Senior citizens and their ilk who have so far been denied easy access to health insurance policies can now hope to get a fair deal, with the regulator planning to pull up PSU insurers for their alleged apathy towards them. The regulator is planning to look into specific cases of public sector insurance companies trying to scale down health policies for the older lot so as to cut down on losses arising out of high claim ratios. The Insurance and Development Regulatory Authority (Irda) has attached great importance to the growth of Health insurance in India. One of the reasons for low penetration in India is the lack of regulations in the health sector resulting in exposure of the beneficiaries to various malpractices present in the system. The health insurance in the country presently covers only 1 % of the population. Health insurance accounts for a 1.2 % of financing total expenditure on health. Chile, a middle- income country, consisting of 1.58 crore people, spends US$ 697 per capita (7.2% of the GDP) but has health outcomes that almost equal those of the USA. Chile developed its health system in three phases: 1.focus on reducing the burden of infectious and communicable diseases [till 1980]; 2.the National Health Fund was established to administer the SHI scheme (Fonasa) through a network of 194 hospitals run by the National Health Services System [during the 1980’s]; and 3.health insurance was opened up to the private sector (Isapres). By 2003, 67% of the population was enrolled with Fonasa, while 20% were covered under 40,000 private plans with 18 licensed, private Isapres. Insurance is mandatory and all have to pay 7% of their wages for health insurance. Both schemes are regulated by the Superintendence of Isapres, under the Ministry of Health (Government of Chile). (Source: Report on Financing and Delivery of Health Care Services in India) “Change is the only constant”. Hence, change we must. Irda’s proposals for the future of health insurance companies: • A minimum capital requirement of Rs.50 crore for a stand-alone health insurance company. • Adoption of a risk based bapital model for stand-alone healthinsurance companies. • Stand-alone health insurers should be allowed to write Personal Accident covers as combined and add-on covers. Similarly, stand-alone health insurance companies should also be permitted to sell overseas travel policies. • The level of foreign direct investment in stand-alone health insurance ventures should be permitted up to 51 %. This is required in order to develop the domestic health insurance market and to provide depth by introduction of newer products, contemporary underwriting practices, claimsmanagement techniques etc. • Continuation of the existing practice of health insurance being written both by life and non life insurance companies. • Agents of both life and general insurance companies should be allowed to take agency of stand-alone Health Insurance companies. As long as the dichotomy exists, there will always be a conflict. It will always be difficult to achieve the right equilibrium that needs to be attained, the correct mix of public and private partnership. India could take a lesson or two from the Chilean experience on public private partnership. Another viable alternative is that there should be a cross-subsidy across risk types. Ultimately whose duty is it to look after the health care needs of the elders; insurance companies or Government? The writer is principal consultant, Price Waterhouse.