In 2022 as Covid abated, the demand for health and term insurance remained higher than in the pre-Covid period. The nature of discussion with insurance buyers has also changed. They no longer ask why particular insurance is relevant. Instead, the question is how to select the best product. This insurance awareness has come at a very heavy cost (in terms of Covid). But now I am optimistic that people will approach the insurance purchase decision constructively, says Kapil Mehta, Co-founder, SecureNow Insurance Broker.
In an exclusive interview with Sunil Dhawan, Mr Mehta talks about the changing pattern of insurance purchases post-pandemic and shares his business outlook. Excerpts:
Since the outbreak of Covid-19, what has changed in the pattern of insurance purchases, both life and health, in the country?
Over the period 2020 to 2021 when Covid-19 was at its worst, the nature of insurance purchases changed dramatically. On the health side there were many new products introduced that focused on Covid. These were indemnity-based as well as fixed-benefit insurances. The demand for regular Mediclaim insurance also increased significantly. Similarly, term life insurance also saw a big increase in demand, perhaps twice as much as the regular demand. Unfortunately, policy issuance, particularly on group term business, came to a virtual standstill. There was a one-year period when it was almost impossible to buy group term life plans except with very low sum assured.
In 2022 as Covid abated, the demand for health and term insurance remained higher than in the pre-Covid period. The demand has been for comprehensive health insurance, popularly known as Mediclaim, and also term life plans. Fortunately, the supply of these insurances is also now back to normal and underwriting standards have returned to the pre-covid benchmarks.
The nature of discussion with insurance buyers has changed. They no longer ask why particular insurance is relevant. Instead, the question is how to select the best product.
This insurance awareness has come at a very heavy cost (in terms of Covid). But now I am optimistic that people will approach the insurance purchase decision constructively.
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As we enter 2023, how should one evaluate and relook at one’s insurance needs, especially in the changing macroeconomic environment?
We must understand the risks we face and address them. Each of us believes that others are more vulnerable. I have been disabused of that notion by the alarming regularity with which I see people fall ill or suffer financial setbacks. Within SecureNow’s customer base we get about 100 health claims and one death claim every day. Additionally, there are many property and litigation claims that we address.
Everyone should buy a substantial term and health insurance plan. For term insurance, the sum assured should be about ten times your annual income. For health insurance, if you live in a metro, then you should have insurance of Rs 20 lakhs or higher. There are many insurances that will cover you for up to Rs 1 crore and those are worth investing in.
After your term and health insurance are in place, buy a home insurance policy if you own a house. There may be other relevant insurance as well. For example, doctors and other independent professionals need to buy professional indemnity covers.
For a smooth claim settlement process, what are some key areas to look at while buying health insurance policies?
The good thing is that all health insurances have a high minimum standard because of regulations. So, all individual products will be lifelong renewable, the premium cannot be changed just for one individual based on a claim, contract definitions are all standardised by the regulator and exclusions allowed are also specified.
Despite these minimum standards, there are differences in claim settlement across insurers and the variation between the top and bottom quartile is getting more marked over the years. You should look at the claims settlement rates that are publicly available, before selecting an insurer. When you buy insurance, pick products with fewer restrictions, so opt for insurance that do not cap the room rent. Similarly, lower pre-existing disease exclusion periods of 2 to 3 years are better than those that have 4 years.
When you claim, do share all the information that insurers asked for. This will include the bill, discharge summary and KYC. Finally, if you are dissatisfied with the claim settlement, escalate the matter to the insurer’s grievance cell or even the ombudsman if needed. The ombudsman, particularly, does take a strong policyholder view in its judgements. The issue is that it takes a long time to get a hearing.
How and what is there for small business owners to safeguard their business operations against unseen financial mishaps? What insurance policies are available to them to insure their risks?
Small businesses are the backbone of our economy. There are over 60 million such businesses but fewer than 15% are properly insured. This is unfortunate because small businesses are the most vulnerable to risks. A fire, a machine breakdown, a burglary, a lawsuit or a proprietor’s ill health can wipe out a small business. That’s why insurance is critical for SMEs.
The main risks depend upon the nature of the business. A service business is exposed to ill health or death of key persons, litigation and increasingly cyber-crime. Manufacturers are also exposed to risks like fires, flooding and earthquakes. All these risks can be addressed through insurance.
The quality of insurance products available is very good. Small businesses are also increasingly aware of insurance and actively seeking to buy. The problem is in distribution. Given the small size of each SME insurance, it is just not viable to distribute in a conventional way.
How is SecureNow gearing up to cater to the growing need for health and life insurance coverage in the country?
Our main focus is to address the risks that small businesses face and through SMEs the lives of the large number of people working there. We distribute about Rs 250 crore of insurance and about half of this is group health and term insurance. However, as an insurance broker, our responsibility is to address all risks and so, where required, we place liability, property and marine insurance as well.
Our business model is to build distribution pipes between small businesses and insurers. In some segments and with some products this can be a completely digital process, workman compensation insurance for example. However, there are many insurances where a small business will do research and look at options online but they would want to speak or meet the broker before buying. We cater to that as well. A third channel is that of embedded insurance. Here we offer insurance options to people buying non-insurance products. One such example is where we offer cyber-liability insurance along with a cyber-security product. Or offer marine insurance to logistics marketplaces. The key skill here is product design and then effective use of technology to quickly issue the insurances and handle claims.
We are actively looking to acquire traditional insurance brokers. Through our platform we can improve their economics. This improvement comes about because of the large number of products that we market and also our technology supported placement and servicing capability. The benefits of inorganic growth are many for SecureNow and for brokers that do join hands with us. Our view is that insurance distributors need to be much larger with deeper pockets to make a difference in insurance distribution. We have taken the initial steps in consolidation and are working with 10 insurance brokers to acquire them.
We aim to reach Rs 1000 crore of premium over the next three years through a combination of acquisitions and organic growth. The impact of this on small businesses will be that it will be much easier for them to buy good quality products that effectively address their risks.
How are you coping with the challenges of small business insurance in the country?
Distributing insurance to small businesses is difficult because of the distribution costs. However, we have fine-tuned this over the past several years and are now able to reach various market segments in a viable and sustainable way. The next step is to scale up our distribution so that many more businesses benefit from our product capabilities. So, our priorities are to acquire traditional brokers, continue investing in technology, and to build a brand recognized by businesses across the country.