What makes well being insurance policies top-notch

But given the fact that more than half of India is uninsured, there is a strong need to expand coverage. According to an Axis Capital sector report, nearly 34.2% of the population had health insurance in FY19. Of this, retail and group health schemes covered only 8.4% of the population. Also, out-of-pocket spend is among the highest in India at 62%, globally.

While the fear of the pandemic might goad some into buying health insurance, a proper understanding and appreciation for the product is what will find the industry its stickier customers. The problem, however, is that there is a huge gap between the details that the health insurance industry highlights when selling and what customers should know when buying.

(See here: Mint SecureNow Mediclaim Ratings 2020)

To bridge this gap, we partnered with SecureNow Insurance Broker Pvt. Ltd to devise MSMR eight years ago. MSMR runs a fine comb on essential metrics that make for a good health insurance policy. This means going beyond the price and looking at features that minimize shocks for the customers and maximizes coverage. We also rate insurance companies on their handling of claims.

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What we rate?

MSMR rates health policies that pay for hospitalization bills; in insurance parlance, these are called indemnity covers. This year we rated 25 companies and 117 policies across three broad categories of price, features and claims.

Like always, we made three cuts to the ratings, based on the sum insured, age of the person and the type of cover—individual or floater which covers the entire family as one unit. The sum insured categories are ₹5 lakh, ₹10 lakh, ₹20 lakh and ₹50 lakh and the age groups 30, 45, 60 and 75 years.

For the individual category, we rated health insurance plans for each age group and for all sums insured. For the floater category, we looked at a family of three for the 30 years age group and a family of four for the 45 years age group. We have not considered older age groups for floater options. For the 75 years category, there is a separate rating matrix on the basis of features we felt were more relevant to this age group.

It’s important to note that MSMR has not rated standard health insurance plans like Arogya Sanjeevani policy and the recently introduced covid-19 standard health plans. Perhaps when public disclosure improves and gets more nuanced, it would make sense to rate standardized products as pricing will not be the only differentiating factor. Additionally, companies that have settled less than 10,000 claims have been left out. These are Edelweiss General Insurance Co. Ltd, Magma HDI General Insurance Co. Ltd and Raheja QBE General Insurance Co. Ltd.

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Rating parameters

Premiums: This continues to be important and so all age categories get a weightage of 25%, except 75 years, which gets 20%. But MSMR doesn’t just pick the cheapest policy and gives it the maximum score.

Given the lack of public data and ample anecdotal evidence that customers have faced unrealistic hikes in premiums, we have accounted for future hikes by averaging premiums and given the ratings on these.

For age categories of 30 and 45 years, we have averaged the premiums by including higher age bands. So if a plan is cheapest at 30 years, but expensive at 45 or 60 years, the average will not be the cheapest and our ratings will reflect that. For the 30 years category, we have averaged premiums across 30, 45 and 60 age bands; for 45 years, across 45 and 60 bands.

For 60 and 75 years categories, we stayed with individual premiums.

Features: We’ve stuck to the time-tested key exclusions and features that make health insurance more meaningful. Out of a total weightage of 40%, exclusions of pre-existing diseases (PEDs) and sub-limits on room rent got maximum attention. But this year we reduced the weightage on PEDs from 15% to 12.5%. This is because many companies are now offering lower waiting periods of less than four years and the new standardized definition of PED is more transparent and customer friendly. Plans with a waiting period of four years get zero as that’s the maximum permissible period.

Features that enhance the sum insured—no-claim bonus (NCB) and restore, which reinstates the level of cover if used in a policy year—have been considered, with scores of 5% and 2.5%, respectively.

We also include preventive healthcare. Plans that induce positive health activity and give monetary benefit by way of discount on premiums or redeemable points get a score of 5%, up from 2.5%.

It should be noted that some insurers are making health plans more inclusive. For instance, a few insurers don’t penalize customers in case of a claim by reducing NCB. Insurers are also beginning to pay for consumables and non-payable items. For example, Tata AIG General Insurance Co. Ltd says it pays a large part of non-payable items, which can make up 10-15% of the hospital bill.

These features haven’t made to our ratings yet, but will do so when more insurers adopt them.

For the 75 years category, the weightage for the broad parameter of features continues at 45%—5% more than the non-senior citizen category because we have looked at co-payment and disease-wise capping exclusions too.

We have removed disease-wise waiting period, given that it’s a common exclusion for insurers. This reduction has been adjusted by increasing the weightages on PEDs, sub-limits on room rent and wellness cover. For this age group, the minimum restriction is more important than the enhancement of cover, so we removed NCB and restore benefits and reallocated scores.

Claims: We have again made three cuts to claims data, giving it an overall weightage of 35%. The number of claims settled gets a total weightage of 25%, whereas time taken to settle claims or ageing of claims and claims complaints get 5% each. Claim is the litmus test for any insurance product and, therefore, needs higher weightage, but public disclosures lack hygiene. From the very beginning, MSMR has been asking for segregation of claims data for retail and group. Though this is already the norm in life insurance claims, it’s not the case for health claims yet.

How to read MSMR?

This year we have rated more plans, altered the weightage on PED waiting period and increased allocation to wellness. While these haven’t significantly impacted the ratings, what made a difference was the drop in claims settlement rate in some cases. That reduced the rating for some insurers. For example, Bajaj Allianz’s Health Guard, which was rated A last year is in the B category this time.

Policies with a score between 65% and 100% are rated A as these plans have most of the essential features we have picked to rate health insurance. Policies with a score between 45% and 65% are rated B, and the rest get pushed to the C category.

Don’t look at top-rated products alone. Given that this year we have tweaked the weightage a bit and claims have seen some drop, you may find that ratings on some of the plans have changed. It’s important to look at the granular data to understand why (see livemint.com/mediclaim-rating). In keeping with your particular needs, you may find comfort in a lower-rated plan, but don’t choose one that’s restrictive by way of exclusions or is offered by an insurer with poor claims record.

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1. Only products listed on an insurer’s website have been considered. 2. GST of 18% assumed.

3. Co-pay-related assumptions: a. Rated “yes" if: 1) There is a co-pay on multiple claims. So, if a co-pay kicks in on the second claim, then this is rated as “yes". 2) Co-pay is charged on non-network hospitals or for reimbursement claims or there is a co-pay for higher room category. 3) There is co-pay if treatment is taken in a different zone. b. Rated “no" if: 1) Co-pay is optional. 2) There is a co-pay on Ayurvedic treatment or OPD but not on hospitalization. 3) Co-pay kicks in at an age higher than the entry age. c. Optional discounts, for example to use network hospitals or opting for co-pay, have not been given weightage. d. Where co-pay and without co-pay options are available, the product variants without co-pay have been taken.

4. Room rent-related assumptions: a. Rated “no limit" if: 1) Any single room available in the hospital is allowed. b. Rated “with limits" if: 1) There is a restriction on getting the most basic single room in the hospital. 2) AC rooms are not allowed.

5. No-claim bonus-related assumptions: If no-claim bonus (NCB) does not increase the sum assured but reduce the premium, it has not been factored in because the purpose of an NCB is to increase sum assured in line with inflation.

6. Wellness benefits-related assumptions: a. These have been rated “yes" if there is a monetary benefit for the insured person to maintain good health. The monetary benefit may be lower premium or redeemable points. b. Health check-ups or discounts on purchases are not considered as wellness programmes. Partly, this is because health check-ups are standard features now and but they tend to be basic. Discounts on OPDs and diagnostics are also easily available without the insurance.

7. Certain product features have not been considered for the following reasons: a. OPD and international treatment: the tangible benefits vary significantly across products in terms of amount and claim process. Also, we do not have public information on the use of these features and the use will be limited. b. Built-in critical illness and personal accident benefit: These benefits are typically bundled with considerable restrictions on the sum assured and the number of diseases. Also, we do not have public information on how often and to what extent these are used. c. Maternity: The youngest age we have taken is 30. Those buying insurance at 30 will be eligible for maternity benefits only a few years later. Public data suggests that child births in India after the age of 30 are limited. This is why we have not given any weightage to maternity. For younger age groups, in the 20s, this is a relevant benefit.

8. Where rates differ by gender, we have considered rates for males.

9. For the age category 75 years, we have rated only those insurance products that can be bought at 75 years. Policies that need to be bought before 65 years but continue until 75 years have not been considered.

10. Only insurers with over 10,000 settled claims in a year have been considered. This excludes Edelweiss General, Magma HDI General Insurance and Raheja QBE.

11. For Bharti AXA, we have not considered individual health insurance because the premiums were not available on the website nor provided by the company.

12.Premium ratings have been done based on the averages of current and future premiums. So, if the entry age for individual insurance is 30 years, then average premiums for ages 30, 45 and 60 are considered. If the entry age is 45, then the average for ages 45 and 60 are taken. This factors in future increase in premiums. In the case of family floaters, only ages 30 and 45 are considered for this averaging because when parents turn 60, children are likely to have their independent insurance policies and are unlikely to be covered under the family floater plan. For age groups 60 and 75, premiums are not averaged.

13.Claims: a. Claims ageing data, claims settled, claims complaints per 10,000 claims data are taken from their public disclosure documents NL-24 (four quarters), NL-25 (four quarters) and NL-41 (fourth quarter), respectively. b. Claims settlement = claims settled/(claims settled + claims closed + claim repudiated). c. Where there is a difference between public disclosures and information provided by the company, we have taken public disclosures. d. Star Health, New India and Oriental have disclosed claim complaints per 10,000 policies. This is inconsistent with the way claims complaints are reported by other insurers—on a base of claims rather than policies. So, we have recast these ratios to make the denominator total claims rather than total policies.

14. National Insurance and United India Insurance have not disclosed data for Q4 of FY20 and, hence, we have only looked at data for three quarter for these companies.

15. Selection of sum assured where exact matches not available: a. Reliance Health Gain: For the ₹10 lakh category, a sum assured of ₹9 lakh has been considered; for the ₹20 lakh category, a sum assured of ₹18 lakh; and a sum assured of ₹6 lakhs has been considered for the ₹5 lakh category. Exact matches are not available. b. Max BUPA Go Active has not been rated in the ₹20 lakh category because they have sums assured of ₹15 lakh or ₹25 lakh. There is no close match to ₹20 lakh. c. For Manipal Cigna, a sum assured of ₹5.5 lakh has been considered in the ₹5 lakh category.

16. Date of birth for each category has been taken as 1 April.

17. For National Insurance’s Parivar Mediclaim Plus, we have rated the restore feature as “No" because restore is narrowly defined and available only in case of road accidents.

18. Where pricing of products varies by zone, Delhi has been considered as the location. This is typically, but not always, the most expensive zone.

19. The premiums we have selected assume third-party administrator (TPA) services.

20. Optional benefits have not been considered.