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A much ignored and yet a critical piece in the health insurance value chain is bringing innovative products and practices that will safeguard customers over the long haul. Currently, most innovations are centered on tariff changes and tweaks in features which is not a sustainable model over an extended period of time. A strong example of an area of opportunity for insurers would be innovations focusing on specialised critical illness covers. Statistics reflect that over eight lakh Indians are affected by cancer every year, nearly five crore suffer from coronary heart disease and almost one lakh patients are diagnosed with kidney failure each year.
As the income level of a rising Indian middle class keeps increasing , so does the rapidity of individuals falling victim to critical illnesses owing to lifestyle factors. The 30s are the new 40s and 40s are the new 50s. Adding to significant woes is the Indian budget with extremely limited suggestions to reform this sector. One can expect fueling of medical expenses which is currently at 15% and rise on total healthcare costs which will in turn lead to higher insurance premium.
With this scenario, insurers need to build capabilities that give insights into unique buying behaviour while at the same time educating consumers on the requirement and benefit of a specialised polic. Indian consumers can be strongly characterised by their financial fragility and lack of financial readiness in case of unforeseen contingencies . Diagnosis of a critical ailment and subsequent treatment could either force a section of the society into poverty or force them to take loans, at times from unscrupulous moneylenders or even result in forced sale of assets including jewellery and homes.
The urban middle class profiles typically have existing mid- and long-term financial commitments in the form of EMIs for a vehicle or a home. Further, rising inflation especially on basic essentials like food combined with conspicuous consumption associated with higher income and living standards has led to an exponential increase in expenses associated with daily living. Not to mention the aspiration to provide the best education for children at expensive universities. With such strong financial obligations and requirements , if a breadwinner in the family is diagnosed with critical illness, the financial security of the household can very much be threatened.
A good critical illness policy not only extends support towards treatment but takes into account the family's needs to protect income loss or wealth depletion. Insurers can create far greater goodwill and value when the critical illness policy provides the flexibility of lump-sum payment upon diagnosis of the illness, irrespective of treatment or hospitalisation costs, thus protecting wealth, income and livelihood. Thus creating value will not only be about what the policy covers but also about how effectively insurers can make it work for their consumers. The other important aspect is taking this "protection across 800 million people in our 650,000 villages.
The total health expenditure in India is estimated at . 3 lakh crore as per industry sources. Hospitalisation spends reportedly account for . 1 lakh crore. As against that, the present level of health insurance premium is worth only . 6,000 crore. In other words, a vast majority in India does not come under the insurance umbrella. What is even more disconcerting is despite the harsh reality this year's budget did not propose service-tax exemptions for the micro insurance sector apart from the RSBY schemes run by the government for below poverty line people. This would have indeed triggered penetration into rural India.
So to make micro insurance work in our favor, as a nation, we need stronger focus from government, including leeway to make use of government infrastructure, increased resources on the part of the industry, leveraging technology and telecom and creating a business model that is viable. What we need is more partnerships between private and public sector to develop innovative and demand-based products.
Also, a clear strategy for educating these markets supported by training modules in local languages is a clear must. There are several products that are now part of the rural India households. We need to imbibe those best practices that ensure general Insurance industry can live up to the promise of being a significant catalyst for real financial inclusion.
Source : ET Bureau
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