With the insurance industry working towards a smooth transition to health portability from July 1, there are several grey areas which call for clarity. Ritesh Kumar, managing director and chief executive officer of HDFC ERGO tells FE’s Saikat Neogi that long-term policies in health are certainly more complex than pricing an annual policy, as the company has to take into account age-related morbidity growth, lifestyle-related health issues and rising cost of medical treatment.
What do you think of the preferred provider network (PPN) concept from public sector insurers? Has it brought any changes for consumers?
The PPN concept is a good one and very popular in developed markets. Either the policy pays only if policyholder goes to the preferred network or there is a higher deductible if he goes outside the network. The concept is not fully at work in India, since companies provide cashless treatment in the network and reimbursement outside network without any differential benefits. Rates of different treatment are negotiated with the providers in the network by third-party administrators/individual insurers. PSU insurers are trying to build their preferred networks, but the real change will come only once the product features reflect the change.
Do you plan to take the PPN platform? How do you plan to optimise the rate chart with every company?
We provide cashless facility through our tie-ups with over 4,000 providers. We are looking at developing a policy with differential terms on the above lines or products with graded benefits in line with the quality of providers. The prerequisite for the same is a comprehensively-negotiated rate chart with providers. For us, customer service is paramount and whatever steps we take will be in line with this focus.
How difficult is it to price a long-term health policy given the large number of unknown variables?
Long-term health policies are more complex than pricing an annual policy, as it has to take into account age-related morbidity growth, lifestyle-related health issues, rising cost of medical treatment, medical advancement trends and a host of related issues. I see the advent of long-term policies in fixed benefit related health policies (payment of fixed sum insured on contracting certain ailment) rather than on reimbursement-based policies where the variable become more complex. HDFC ERGO offers multi-year policies for critical illness which are benefit-based policies. On hospitalisation, we offer up to two-year product, renewable at the end of the policy period.
What do you think of the one-size-fits-all nature of most motor insurance products vis-?-vis usage-based insurance?
Motor has been sold as a standard product for long. After de-tariffing, companies have been allowed to offer differentiated products but the additional features can only be offered as add-on covers on top of standard motor product. Companies have already started offering add-on covers, but it is early to comment on their success. However, its expected that in future, these additional covers will become popular. Usage-based insurance is certainly a possibility, but it would first need de-tariffing of the market on the wording side as well.
How should a consumer should approach travel insurance? What steps should the industry take to make them more popular?
To me, overseas travel insurance is an integral a part of any international trip and is as important as ensuring the visa or airline ticket or stay arrangement. I has seen travellers, especially those travelling within Asia, compromise sometimes and not buy insurance, which is not correct. The industry has worked towards making the purchase of the product simple. The product can be purchased online, through insurance agents, or from bank branches. Today, a last-minute purchase is possible with online platform. Insurers have also been communicating messages on travel insurance through the mass media. For instance, our company offers all retail policies including the overseas travel insurance through our website.
With the changing demographics, working age and other social factors, what new categories of insurance products can a customer expect in the future?
Insurance penetration in India is low ? only 0.6% of GDP. Less than 2% of the homes are insured and under 10% of the total health spend in the country goes though insurance. The first and foremost change I expect with the changing demographics is the increase in the take-up rate of insurance. As far as new products are concerned, I see more products in the wellness space and more long-term policies being introduced. We are looking at developing multi-year policies for motor insurance and top-up products in health. The real impetus in product development would only come once we see de-tariffing in the wording.