Month: March 2012

Being a part of health insurance services company I have always noticed that there are large number of people, who at first show keen interest in buying Health Insurance services, but after they are recommended some of the best suitable health insurance policies, they suddenly just disappear. Intrigued by this, we did a detailed internal analysis and a customer survey, and we realized that most people, including some of the brightest professionals, delay their decision/action to buy, primarily due to 3 reasons:

a) The product has no instant gratification or compulsion to buy.

b) Expectation of a perfect match to their requirements (and)

c) Due to over exposure to multiple product features, advertisements, and promotions.

 

Our Internal Customer survey done with Medimanage.com customers, revealed that point c) is an important external influence on the decision making process of the health insurance buyer. To-be consumers are confused with multiple products, from various brands, and hence delay their decision on purchase of a health cover, till they can find a recommendation or reference they can depend and rely on. We cannot blame the general customer, as we are aware, and you would agree, that buying Health Insurance is far more long term than buying the latest Widescreen LED Television, and far more complicated than buying a standard term insurance.

 

The over exposure of products has been aptly termed ‘The paradox of choice’ by Barry Schwartz, a social scientist, in his book with the same name. He says, “Unlimited choice results in genuine suffering. The more choices we have to make, the less certainty we seem to have. When we have 285 kinds of cookies to choose from in the grocery store, how can we be sure we’ve picked the right one? And that’s just cookies. When faced with seemingly unlimited choices that have significant consequences like which stocks to invest in, which career to pursue or even which person to marry, many people become ‘maximizers’: people who relentlessly search for the best option. These people spend a great deal of time and energy on choices that will never satisfy them.”

 

Personally, as a buyer, it’s very clear and almost a fact for me, that more product offerings in the market, topped with more promotions, more advertising, are only complicating things, and delaying decisions specially and importantly, when buying products or services, I “need”, but don’t have a strong “want”.

 

So, coming to the million-dollar question, how does one sift through a minimum of 50 health insurance policies and variants and zero in on the best health insurance suitable for his/her family? My answer is quite simple; you need to first, right in the beginning, understand that buying a long-term product like Health Insurance is like getting married. The younger you are, you will have more choice, but there never will be a perfect match for your requirements. You cannot keep waiting for the best product, because there isn’t one.

What you need to look for is the most suitable product, rather than a perfect match, here’s how.

1.    Do a thorough need analysis:

To find a product, which is most suitable to your needs, you need to understand your needs first.

• The family members you want to cover. The more members, the higher the age, and the higher the coverage you need.
• The city where you live, and where you are likely to take hospitalization treatment. If these cities are in the northern or western metros (like Delhi, NCR, Mumbai, Ahmedabad etc.) you need more coverage.
• Your choice of type of hospitals you want. Would you prefer treatment in a neighbouring nursing home, which has a personal touch or would you always prefer a large corporate hospital for the smallest of treatments. If you are expected to use mega hospitals, for all kinds of smallest treatments, you would need a larger sum insured, for sure.
• Similarly, the choice of room you want, would impact the kind of policy suitable to you. If you are used to private, deluxe AC rooms. The best test for this is, if you had no insurance today, and if any of your family has unfortunately been hospitalized, would you take a private room, or settle for a shared room? This type of room is your real choice, without financing from an insurance policy.
• Your long-term plans would affect the kind of product, and coverage you would need. For instance, are you/any member in the family planning to migrate abroad etc.?
• What is the amount of expense on Healthcare you can bear on your own savings?

2.    Recruit a Good Advisor

There are too many general “tips”, “guides”, and other noise about Health Insurance today. If you are looking for unbiased advise to choose the best Health Insurance policy suitable to you, you need to take pain in finding a good health insurance advisor (preferably a broker, who can provide wide spectrum of product options), one who can provide you genuine advise, service the policy, and also has experience in managing health insurance claims. The claims management part is very crucial, as Health Insurance claims can have a lot of back and forth, and get tedious at times, and hence requires professional help. A good advisor plays the role of a linchpin in a complex service and product like Health Insurance, across the life of the policy.

(Full Disclosure: The writer of this blog post works for a Health Insurance Advisory Broker Firm)

 

3.    The younger you are, the more choices you have.

Like marriage, the younger you are, you have larger spectrum of choice, and hence you can get choosy about the most suitable product. The older you get your choices narrow. Once an ailment kicks into the health of any of your family members, the choice can become minimal to one or two products. If you were diligent enough, choosing and buying Health Insurance, when you don’t need it, would provide the widest health cover possible.

4.    There is no Perfect Match

As mentioned earlier, there is no perfect match, and hence, waiting for ever to find the perfect fit to your requirement, may prove hugely futile. After detailed understanding of your needs, and taking sound advise, you need to settle with a good but imperfect product. There is no point waiting for “that important feature” in the product. What’s more, if such product does appear in due course, you can always port the same, with proper planning in place.

5.    The Real thing – look beyond the looks

I am a great movie buff, and after some experience, I observed that today, with strong marketing geniuses around, all films look good, till one week after the release. That’s when the realities and reviews sink :). Health Insurance is no different. Packing old wine in new bottle is an art, many have mastered. Its important to do a core need analysis, and purchase a product/service, that meets these core needs. Anything over and above this is either packaging, or, bonus (if it comes at a similar price.)

6.    Look Long term

Look really long term. Understand that Healthcare inflation in India is rocketing through the roof, and hospital bills are becoming more and more unmanageable without financing solutions like Health Insurance. You need to realize that if you are 30 today, you will most probably need health insurance the most maybe in 15-20 years. You need to factor these inflated costs and then look at an optimum coverage.  Do not settle for a coverage or sum insured, based on current costs of hospitalization.

7.    Understand the *

I know it’s a tad boring to read the fine print, called the policy wordings document. But when you are buying a product, which is a solution, for 20+ years, you need to take that pain. If you cannot understand the legal and medical language, you can always ask a health insurance expert advisor to take you through every part of the policy. The wordings will give you a flavour of how the product actually works, and what problem it solves, and does not solve.

8.    Meet the Parents

It’s important to meet the parents, and understand the background. Knowing the basic reputation of the group and joint venture partner behind the product is critical for a long-term financial product. It reflects how the company will react, specially, in downturns in the industry or its own company.

 

Unarguably, Health Insurance is a critical piece in your financial jigsaw puzzle. Taking the above-suggested points into consideration, apply your own judgement and common sense, take a personal deadline, and take the proverbial “leap” of faith.  Believe me, you will not go wrong, till you act quickly, and take a call.

 

In case you have any questions, or feedback or comments, do share the same in the comments below. I am also available at the email address: [email protected]

Manish wrote about the budget a few days ago, and he mentioned about a less publicized aspect which affects the way insurance policies are treated. Point 7 in his post is about a new provision that disallows tax benefits to insurance policies that don’t have a sum assured of at least 10 times the premium.

So, things like LIC’s Jeevan Vriddhi which only insures 5 times the premium will not be eligible for any 80C tax deductions or 10(10d) deductions, which means you can’t reduce the amount invested in this policy from your taxable income under Section 80C, and then the money you get at maturity is taxable as well.

Deepak Shenoy wrote about this today emphasizing two key things. First, that this is applicable only to policies that will be bought after April 1 2012, and your existing policies aren’t affected.

Second, for policies that have varying sums assured throughout the tenure (something I didn’t know existed) the minimum sum assured will be considered while deciding if they’re eligible for deductions or not.

I missed including this clause in the budget infographic I made earlier since I didn’t go through the memorandum and only the budget speech, but this is an important change and should have been mentioned.

I’m only writing about this today since RRK left a comment about how this has not been picked up by most of the media and needs to be communicated to a wide audience. He has written a post on the repercussions of this and that’s a good read as well.

My thought on this change can be simply summed up by two words – good riddance!