Key Words: Awareness, Association, Determinants, Health insurance, IRDA, Portability

Transcription

1 PORTABILITY OF HEALTH INSURANCE *Dr. D. Shreedevi *Associate Professor, Apollo Institute of Hospital Administration, Apollo Health City, Jubilee Hills, Hyderabad (M) (O) Abstract The insurance industry today functions in a highly competitive environment, with increasing private participation and an expanding product portfolio. In this changing landscape, insurers have to invent ways to offer more value than ever before. The present study identifies the determinants of awareness of health insurance portability. The variables like age, gender, occupation, income, education, type of policy, etc. are examined as determinants. For the purpose of the data collection, structured questionnaire was designed. The study found that 36% of the respondents are aware of health insurance portability, whereas 64% of the respondents are not aware of it. It was also found that there is an association between education and occupation with that of awareness of health insurance portability. The major reasons for portability are delay in claims settlement, poor customer services and mis-selling. Study also finds that portability on health insurance has not become as popular as in other sectors. It is also found that 29 policy holders who are not satisfied with their current insurer 21 of them are aware of health insurance portability. Among aware customers, majority of them are not willing to port to other insurer, because of difficult porting procedure. The study concludes that the awareness for portability on health insurance is low among policyholders. It is also inferred that the porting procedure itself is so cumbersome that it indirectly discourages the policyholder to use portability on health insurance. Key Words: Awareness, Association, Determinants, Health insurance, IRDA, Portability 1

2 Introduction Everyone likes a healthy smooth, secured, happy and joyful life. But the fact is that the life is full of risk and uncertainties and it turns on a time. In life, there is always a risk of loss of health, wealth, near and dear ones, or any other kind of incident, which may results in any kind of loss. Usually these kinds of incidences are unpleasant, unpredictable and spontaneous, and we are not prepared for them-neither financially, nor mentally. Insurance provides defense against such disasters by pooling the risks. Insurance makes many pay for the losses of the unlucky few. Insurance is conventionally, the most preferred method of risk sharing. It is used to hedge against the risk of a contingent, uncertain loss. Insurance may be described as a social device whereby a large group of individuals or companies through a system of equitable contribution may reduce or eliminate certain measurable risks of economic cost resulting from the accidental occurrence of disastrous events. The various components of non- life Insurance or general insurance are fire, marine, motor, engineering, health and aviation. Chart 1 shows the Insurance industry in India. There are 24 non-life insurance companies operating in India, of which four are under public sector, three standalone health insurers and the two specialized institutions. Chart 1 The general insurance industry is estimated to grow by over 18 percent to reach a size of Rs 100,000 crore by 2015 and Rs. 2,50,000 crore by The current size of the non-life industry is Rs. 58,344 crore growing at the rate of 23.16%. In terms of penetration general insurance in India is 0.60 percent of GDP against the world average of 2.14 percent. The huge market largely remains untapped in both rural and urban India as 70 percent of the population is still not touched by insurance companies. Need for the Study While the penetration of the health insurance market is still quite small, it is one of the fastest growing industries in India. IRDA has announced portability on health insurance policies in the year 2011, but majority of the population in India is unaware of it. When a policyholder switches from one insurer to another, it is of course a loss to the insurer from which the policyholder has switched. From insurer s point of view, no insurer would invite portability to 2

3 their existing customers. Thus it is important for an insurance company also to know why a customer ports from one insurer to other. This study focuses on finding out the reasons which motivates the policyholder for porting the health insurance policies. The outcome of the study will help the insurers by revealing the critical areas, so that insurers can concentrate more on those areas to retain their existing customers. Significance of the Study The awareness of health insurance itself is very low in India, so it is important to analyze the prevailing level of awareness among policyholders, what are the determinants of awareness, and the means by which the policyholders get information about the latest reforms and updates of insurance markets. Another important aspect of health insurance portability iswhat makes the policy holders switch from one insurer to other. The reason for health insurance portability indicates what exactly makes the customers unhappy, and what factors attracts the new customers as well as helps in retaining the existing customers. Objectives of the study 1. To study the awareness among the policyholders regarding portability. 2. To analyze the determinants of awareness of health insurance portability 3. To examine the reasons for health insurance portability. Research Methodology Sample design: A convenient random sample of 100 respondents were chosen Sources of information: the primary data has been collected through structured questionnaire by covering the wide range of demographic, economic, and social factors. Secondary data was also used for the study which was mainly from articles, IRDA website, insurance journals etc. Scope of the study: The study includes both; the policyholders and the insurer. The study examines the factors like age, gender, educational status, marital status, income, occupation etc. to determine the level of awareness. Tools of Analysis: Simple descriptive statistical tools like, frequencies and percentages was used for analysis. Chi square test for applied for analyzing the association of attributes like occupation education, etc. with the awareness of health insurance portability. Limitations of the study It does not include the study of the financial impacts of portability of health insurance policy on the profitability of the insurance company. Need for Health Insurance Health insurance is insurance against the risk of incurring medical expenses among individuals. Health insurance policy is a contract between an insurer and an individual / group in which the insurer agrees to provide specified health insurance cover at a particular premium subject to terms and conditions specified in the policy. India is a country where people are not provided any state run health insurance programs rather people have to shell out money from their own pockets to buy health insurance policies in India. Health insurance in India has a very low penetration. 3

4 Types of Health Insurance Coverage The health insurance coverage can be broadly divided into three categories: Mediclaim policy: under this type of coverage basic hospitalization expenses are covered. It includes expenses related to hospitalization and services rendered by doctors and nursing home. Long-term care insurance: This category covers expenses related to major surgery or operations due to serious illness or disease. Disability income cover: it is aimed at providing for the lost income during the disability period or during the treatment period. Indian Health Insurance Industry The health insurance market in India is unique and has developed a strong growth potential in the recent years with the entry of many foreign players in the market. The health insurance market in India was worth INR 5,125 crores with a compounded annual growth rate of 37 percent between 2002 and The health insurance market covers very smaller part of the total population (about 10%) in India. Presently, schemes like Voluntary health insurance schemes or private-for-profit schemes; Employer-based schemes; Insurance offered by NGOs/ community based health insurance, and Mandatory health insurance schemes or government run schemes (ESIS). The latest reform in health insurance market in India is the announcement of Portability of health insurance policies by IRDA. The main objective of IRDA in announcing portability is to safeguard the interest of the policy holder. Portability in health insurance policy is a step towards insurance policy holder protection and surety of high quality service by insurers. Health Insurance Portability Health Insurance Portability means transfer of the credit gained by the insured for preexisting conditions and time bound exclusions if the policyholder chooses to switch from one insurer to another insurer or from one plan to another plan of the same insurer, provided that the previous policy has been maintained without any break. In simple words, portability in health insurance is similar to portability in mobile numbers, i.e. one can switch from one service provider to another without changing the mobile number. Similarly, one can switch from one insurer to another without any loss of waiting period gained and pre-existing condition. Need for Portability in Health Insurance Before the announcement of portability on health insurance policies, loyalty of a customer towards one company was not rewarded by company another in terms of the credits gained by the customer; especially in the scenario of a highly competitive insurance market. It was seen that though the customer was not satisfied with his present insurer, he was not switching to another insurer due to the loss which he will incur in terms of credits gained by him with the existing insurer.. Health insurance portability gives the flexibility to the customer and increases the fair competition among companies. The concept of portability in health insurance in other developed countries like U.S.A., U.K. and Canada is not new. Form of portability differs from country to country, and has its own guidelines. However, for India, health insurance portability is a very new concept, almost 4

5 three years old. The IRDA, vide circular dated February10, 2011, had issued guidelines on portability of health insurance policies. Data analysis and Interpretation The awareness for health insurance portability among respondents is only 36% and it is very less. The contribution of newspapers is maximum (41.67%) in spreading awareness among policyholders followed by television (30.56%), friends and colleagues, insurance agents and internet. Married respondents who are majorly in the age group of years are more aware of insurance portability. Chi-square test was done and the results showed that there is a significant association between the education level and occupation of the respondents and their awareness for portability on health insurance. From the findings it is inferred that though there is not much difference in the awareness among the individual and the family floater policyholders, individual policyholders are more aware of portability as compared to family floater policyholders. The occurrence of porting is more in the individual policyholders as compared to family floater policyholders. Out of total 100 respondents 71 respondents are satisfied with their current insurer whereas 29 respondents were not satisfied. Out of 29 unsatisfied policyholders, only 4 are willing to port and 17 policyholders, in spite of being unsatisfied, do not want to port, 8 of them were neutral. The 17 policyholders /respondents who are not willing to switch from their current insurer, 13 are not porting due to the complicated porting procedure and only 4 of them due to other reasons. Though policyholders are not satisfied with their current insurer, they are reluctant to port due to complicated porting procedure. The reasons for porting are shown in the following chart. The inadequate coverage is the most prominent reason followed by mis-selling and poor customer service for customer dissatisfaction and also for portability. Advantages and Disadvantages of Portability Advantages: 5

6 When switching from the existing insurer to a new one, the policyholder is entitled to Sum Assured and cumulative bonus also forms a part of health insurance portability and he will be entitled to the same. While moving on to a new insurer the customer will get a waiver on the thirty days of waiting period in which no cover is provided. There is portability available for waiting period of pre-existing diseases. This means that while shifting to a new insurer, the time that the customer has spent with the old insurer would be taken into consideration. It is a customer centric initiative that is easy and convenient especially for those who are having a tough time with their existing insurer. While planning to switch to a new insurer the customer are surely offered lower or competitive premiums Can ensure better claim settlement from all the companies while planning to change insurer. Will get access to new, better and upgraded health insurance products. It enables to move towards better health insurance plans and products as per changing requirements and needs. Health insurance portability has triggered a strong will to retain existing customers in all competitors thus paving way for better customer service and more customer centric products at disposal. It has come as a boon for all who fall under the head of group insurance policy of the organization. The customer can freely change job and switch his existing policy that is under the banner of the current organization without much hassle and without losing on to the accrued benefits. As a lot of information is shared across the insurers there is a lot of transparency created with the onset of health insurance portability. Are not charged anything extra when policyholder opts for portability. They need to pay only the premium. Disadvantages: Can opt for health insurance portability only when the policy is due for renewal. Different health insurance companies have different polices and features, so there is a need to opt for the new insurer very carefully. If customer wishes to switch to group medical claim then it becomes mandatory for him to first move it to the same company and then only after a span of one year will he be entitled to switch to some other company. May be charged loading charges on the premiums for the pre-existing disease policy while switching to a new insurer. In case of shifting the group insurance policies to individual policies the customer may lose on to maternity benefits which are not included in individual policy. Effect of portability on Insurer Health Insurance Portability is excellent initiative that is beneficial to customers. Customers can switch from one insurer to other if they are not satisfied by their insurer. Health insurance portability lets customer carry particular benefits (waiting period) to the next insurer. Henceforth customer can choose health insurer of his own choice without much ado. However, Health 6

7 Insurance Portability directly affects insurers since they are the ones who will be initiating changes and upgrading products and services. The following events could unfold because of Health Insurance portability: More Competition With customers having the choice to switch, insurers will certainly notch up everything. To get more market share more competition will ensue leading to product innovation as well as improved services. Customer Engagement Apart from products, major differentiating factor would be services. The insurer s will improve and set new benchmarks in services to pull customers to their brand. More customer relationship building activities will be implemented. Logistics Since customer can switch to new insurer, a lot of data would be shared between insurers. The process is complicated since data everywhere is not centralized. However in long term, health insurance portability would lead to more transparency. Unethical Practices Health insurance portability could also mean more frauds and unprofessional conduct. An insurance agent might not tell all coverage while driving customer to switch product. New products New innovative products might come with more benefits and pricing would be competitive. Product features, brand image and claims ratio will be deciding factors in premium variation. Terms and Conditions Need to be Fulfilled for Portability One can port the policy only at the time of renewal. That is, with the new insurance company there will be new insurance period Apart from the waiting period credit, all other terms and conditions of the new policy including the premium are at the discretion of the new insurance company At least 45days before policy renewal is due; customer has to write to his/her old Insurance company requesting a shift, Mention company to which customer want to shift the policy, Renew his/her policy without a break (there is a 30 day grace period, if porting is under process) Discussion The announcement of portability on health insurance in October 2011 was a major reform in the Indian health insurance industry. It allowed the policyholders to switch their policies to other insurer in case of any dissatisfaction towards the current insurer without the loss of waiting period gained and exclusions for pre-existing conditions. Though it has been almost 3 years of the announcement of health insurance portability, the awareness of it is very low among the target population. At first sight portability seems to be very attractive from the point of view of a policyholder, but in reality, it is not so. One cannot port a policy as and he wish. The regulator, 7

8 i.e., the Insurance Regulatory and Development Authority (IRDA), has given insurers the right to accept or reject port-in requests. This implies that if the other insurer finds the application unfavorable, it can decline the request, and one will have to stick with the insurer. All portability proposals are treated as new and put through the underwriting guidelines afresh. The underwriter has the right to reject any proposal. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that. The application may also be rejected on grounds of insufficient information, delay in submitting documents and poor claim history. As all insurers wish to insure the persons who are young and with low health risk, thus the insurers put lot of clauses and restrictions, which is indirectly not encouraging portability. To sum up it can be said that health insurance portability is not transferring the old policy to a new insurer but buying a new policy without the waiting period clause. It can be said that insurers have made porting difficult. Most policyholders who are aware of health insurance portability, and are willing to do so, tend to have a claim history. And, no insurer is willing to take a customer with a claim history in the past three to five years. Additionally, insurers don't believe portability will be profitable on the back of additional waiting periods and exclusions not applying. They blame the past regulator for not approving proposals which would have made porting profitable. As a result, no health insurer has publicized portability. Suggestions and Recommendations Based on the findings of the study, the following recommendations emerge Government and private organizations should take initiatives to spread awareness for portability on health insurance among policyholders. Television, articles, social media, and other mediums useful for public communication should be utilized to do so. The procedure for porting must be simplified further for a better and meaningful use of portability. Policyholder should be free to port his/her policy throughout the year at any point of time instead of only at the time of the renewal of the policy. Conclusions The study was conducted with the objectives of finding out the awareness for portability among the policyholders in India, and also to find out the determinants of awareness of portability, and to study the perception of policyholders towards the porting procedure. Based on the results of the study it is concluded that Even after three years of announcement of portability on health insurance by IRDA, the awareness for portability on health insurance is very low among the policyholders. Policyholders who are aware of portability and are not satisfied with their insurer are also not willing to port from their current insurer due to complicated porting procedure. References 8

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