There are three million life insurance agents versus 150,000-odd health insurance agents across the country. If we take the number of people who depend on selling life insurance for a living versus those who depend on health insurance, the differences are likely to be starker.
Those of you who thought that low commissions are the reasons for this anomaly need to rethink. Even on a traditional policy, which is likely to replace unit-linked insurance plans as the most sold policy type, the first year’s commission will be around 35% with around 5% renewal premium, whereas health insurance provides a consistent 15% commission throughout the term of the policy.
Also a customer who has renewed his health insurance policy for at least a couple of years is most likely to stay the course and continue renewing the policy for a really long period since the history of the policy provides real benefits in terms of coverage of pre-existing disease and no claim bonuses. Health insurance policyholders who drop out or shift to another company will normally do so in the first couple of years after they take up a policy.
So if low commission is not the reason for this relative lack of interest in the health insurance product by the agency force, what is?
First is the low ticket size of the policy. The average mediclaim premium last year was Rs 6,600 compared with an average premium of Rs 15,500 for a life insurance policy. So while the commission percentage on a mediclaim policy is attractive, the absolute commission amounts are not.
Second is the difficulty in selling a pure risk policy which only pays out if you actually incur hospitalization expenses. For the last four-five decades, Indian consumers have been fed on a diet of life insurance policy being a tax-saving instrument and they find it difficult to adjust to just a risk policy even if it provides a tax break.
Of course, this situation is changing with the soaring costs of healthcare and the specific tax incentive available for mediclaim policies under section 80D of the Income-tax Act. It seems nothing drives a consumer more than the prospect of saving some of his hard earned money from the tax collector.
This is one reason the health insurance industry is worried about the impact of the direct taxes code (DTC), which seeks to club the deduction for both life and health insurance, with a limit of Rs 50,000. With its far superior distribution reach and the attraction of return on money invested, the life insurance industry is likely to take the maximum benefit out of such a deduction if DTC is enacted in its current form.
Third is the widespread perception that general insurance companies will not deliver when the insured person is hospitalized and a claim is required to be paid. The recent imbroglio over the abrupt withdrawal of cashless facility by public sector companies, which are the largest insurers in the market, has only served to deepen this impression.
While there have been perfectly justifiable reasons for such withdrawal, the abruptness and the lack of communication with policyholders only served to reinforce public perception about the insurance company’s reluctance to pay out claims. These negative perceptions are already quiet strong, as can be seen from the numerous cases going on in consumer courts on mediclaim policies alone.
It is difficult to sell mediclaim policies to healthy people in the face of such widely held negative perceptions about the industry. Non-standardization of policy documents and numerous exclusions and many more reasons make it a complicated policy, which few customers spend time on understanding. In fact, I realized that in some companies, their senior personnel are not totally conversant with their company’s policy documents. So if agents do not fully understand what they are selling , it can be excused.
Claims are almost inevitable in a mediclaim policy over the years, unlike a life insurance policy where death claims are rare. On the other hand, a significant number of consumers also do not reveal their full health facts at the time of taking the mediclaim policy, making the claim process even more complicated.
At the time of making the claim, the consumer rightly expects the agent to help in the claim process. This can be a problem in most cases since public sector insurers have outsourced the activity to third party administrators who do not entertain queries from agents.
Most of the private sector insurers, who have in-house claim processing centres, also do not provide any interface to the agent for finding out claim status. All this makes agents helpless in providing a service to his clients when he rightfully expects it. In fact many large life insurance agents do not take up mediclaim business precisely for this reason. They fear they may lose the clients’ lucrative investment business in their quest to provide an additional service for the client and earn some additional money.
So, is there a solution?
Two things that need to be tackled at the industry level is standardization of mediclaim policies and customer education on the need to be transparent while buying the policy. This will make sure that customers become more aware of what they are buying.
At an individual company’s level, the claim process needs to be streamlined with access provided to the agent so that he can act as a point of communication between the consumer and the insurance company if the consumer prefers dealing through the agent.
Also, if the regulator starts publishing monthly data on claim repudiation percentages similar to the death claim repudiation data being published for life insurers, consumers and agents can take informed decisions on which insurance company to opt for.
The under-investment in health sector will hurt the India’s growth story in the medium- and long-term and the mediclaim industry needs to get its act together to play an even more significant role in overcoming this under investment. A retail product such as mediclaim needs the support of professional agents who can assist in deepening the pool of those who are covered and hopefully these steps will help make health insurance policies more attractive for the agents.
And lastly, one hopes that there is a separate deduction for health insurance sector over and above the Rs 50,000 as proposed in DTC.
Harsh Roongta is chief executive officer, Apnapaisa.com.
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