A solid cover for the poor

Premium is over three times the current health insurance industry

 

When I heard that the Finance Minister, Arun Jaitley, had announced ₹5 lakh cover to 10 crore families, translating to 50 crore people, I thought he had mistakenly added a zero to all three areas. I was incorrect. In the Budget, the Centre has unveiled one of the largest funded healthcare programmes — The National Health Insurance Scheme.

When looked at differently, the Centre intends to provide about 40 per cent of our population with health cover that will allow them to be treated in a hospital of their choice.

The premium equivalent of this initiative is about ₹1 lakh crore because such a cover costs about ₹10,000 per family. That’s the size of the entire general insurance market today and over three times the current health insurance industry.

This is ambitious. But I think the Centre will follow through. We have seen this doggedness in the implementation of the Pradhan Mantri Jeevan Jyoti (term life) and Pradhan Mantri Suraksha Bima (accident insurance) where 5 crore and 13 crore people respectively, have been covered. Three years ago, when these schemes were launched, I assumed they would be poorly executed with few claims. However, the claim ratio has often been over 100 per cent, which means that buyers are effectively using the insurance. In the Budget, the Centre has reiterated its intention to cover all poor people with these insurances.

To make it work

The health scheme will require massive improvement in medical infrastructure. Typically, 3-5 per cent of people in any group make a health claim. This suggests that when implementation is complete, between 15 and 25 million poor will access hospitals.

The system cannot absorb such volumes yet. As detailed processes are worked out, it is hoped the Centre leverages the existing ecosystem of private hospitals, third-party administrators, intermediaries and insurers for a quick start.

The cover should not be restricted like the ESI, to specified hospitals.

Some years ago, we had provided health insurance to a small group of 300 daily wage workers. Initially, claims were negligible because the workers were being turned away at the hospital reception. It took months for the workers to build courage to show their mediclaim cards and demand treatment. That mindset change would work better if it took place with 500 million people.

More affordable

Senior citizens will benefit from the increase in deduction limits under Section 80D from ₹30,000-50,000 and in Section 80DDB, for critical illnesses, to ₹1 lakh.

A ₹5 lakh insurance cover costs about ₹50,000 for a couple in their early 70s. So, this tax benefit will make health insurance more affordable for seniors.

They will now be able to invest a higher sum of ₹15 lakh in the Pradhan Mantri Vaya Vandana Yojana that guarantees a good 8 per cent return.

I appreciate the references to micro insurance and fintech. Microinsurance refers to low-value, limited period insurances for risks specific to the poor.

For example, it would include benefits to farmers, if the rainfall is poor or crop prices are low or cattle are ill. Microinsurance can materially improve risk management for the poor and there are proven models, particularly in Africa, that we should adopt.

Fintech refers to the use of technology in finance. In insurance, it helps build access to customers and settle claims. The sector will prosper if there is an enabling framework governing payment processes and areas where multiple regulators are involved.

I was disappointed with the proposal to merge the three public sector insurers — Oriental, National and United prior to listing.

Each of these insurers needs to be market-ready on its own. Underwriting practices are weak in some areas within these insurers. I would have expected the Centre to first identify and resolve the core issues before listing.

There were some missed opportunities too. Catastrophe insurance finds no mention despite large-scale damages over the past few years.

The writer is the co-founder and CEO, SecureNow

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