Importance of health insurance in a world of frequent pandemics

Updated: Jun 24, 2020 8:21 PM

India is the diabetes capital of the world and as a population, we are exposed to an increasing number of lifestyle diseases. This combined with the rising cost of medical care makes a deadly combination that could create a rot that we in India will all suffer with – if we don’t find a way to manage it better and mitigate its impact.

Coronavirus Outbreak, Novel Coronavirus COVID-19, global health crisis, physical immunity, health immunity, financial immunity, Arogya Sanjeevani policy, health insurance, Indemnity covers for COVID-19With the possibility of more such pandemic situations in the future, the need for universal health coverage in India is more pronounced than ever.

We are living in a world of increasing uncertainties. The COVID-19 pandemic has created mayhem and disruptions of unimaginable proportions across the world. Testing the most critical infrastructure of healthcare services, this virus has infected millions globally and has left thousands dead. Expansion and support from healthcare services, providing sustenance to the most impacted sections of society, providing essentials in a lockdown scenario, dealing with system-wide stress across industry segments, and finding ways to reduce financial stress are all getting increasingly complicated with no clear end to this pandemic insight.

It was bad enough that medical cost inflation had been estimated to be in the double digits in the near future. With the looming presence of this virus for what looks like an unlimited period of time, these estimates will only get worse.

During such times, it is even more crucial to seriously consider including medical and health covers in your financial planning. And for those who already have it – look at the adequacy of the cover. It is bad enough that India continues to have one of the lowest penetration of medical insurance anywhere in the world. Considering the magnitude of the pandemic we are faced with, the 2nd largest populated country in the world needs to seriously consider making health insurance mandatory for everyone. Bringing universal health insurance coverage to cover all strata of society has now become an urgent national objective.

India is the diabetes capital of the world and as a population, we are exposed to an increasing number of lifestyle diseases. This combined with the rising cost of medical care makes a deadly combination that could create a rot that we in India will all suffer with – if we don’t find a way to manage it better and mitigate its impact.

While healthcare and medical treatments are improving by leaps and bounds, delivering more optimistic outcomes, the flipside has been an increase in the cost of treatment. According to a report by Mercer Marsh Benefits, the medical trend rate in India (the per-person cost increase due to medical inflation) is likely to rise at double the inflation rate. So, effectively, the medical trend rate is likely to be 12-14% in India, as inflation hovers around 6-7%. Studies have shown that Out-of-Pocket (OOP) health expenses drag millions of Indians below the poverty line every year, and even those who have moderate savings and investments face a major setback to achieving other goals and aspirations when impacted by large unexpected medical expenses.

Health Insurance policies offer a number of features that are beneficial to the policyholders’ physical and financial health. While choosing a policy that is most suitable for you and your family, there are various things to take into account, such as, whether you want an individual cover or a family floater. These include the network of hospitals offered, waiting periods for various diseases and conditions before they are covered, additional benefits like free medical check-ups, terms like co-payments and caps on treatment, and of course, the premium that you will have to pay for coverage per annum.

Depending on the policy terms, the insurer agrees to offer fair reimbursement and a cashless treatment if the policyholder is hospitalized for an unexpected medical condition/injury in a network hospital. The reimbursement from the health insurance policy helps individuals and families in dealing with the expenses without exacerbating the financial situation as it usually covers around 90-100% of medical and hospitalization expenses.

Due to the global pandemic, the scenario of health insurance in India has changed. The insurance industry is witnessing a spurt in interest regarding health insurance policies, especially since a recent IRDAI notification has declared that the hospitalization due to COVID19 will be covered under existing health insurance policies. Health and general insurers have also been rolling out focused health covers against Covid-19. It is unfortunate that we had to have a pandemic for the awareness of Health Insurance and the need of such Insurance policy to be recognized.

The Insurance Regulator (IRDAI), healthcare providers, and insurance companies are working hard, together, to deal with these unprecedented times. However, the pricing of risk due to a higher probability of such pandemics occurring every few years will become unavoidably complicated. The solution lies in having a larger penetration of health insurance and better/more predictable management of medical costs combined with the availability of granular data to manage the insurance portfolio. With the possibility of more such pandemic situations in the future, the need for universal health coverage in India is more pronounced than ever.

by Roopam Asthana, CEO and Whole Time Director – Liberty General Insurance

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