Home / Opinion / Buying mediclaim is hard but harder is to know if it is any good

Quick, do the math. If it takes you two hours to read one policy brochure and there are 65 brochures, how much time will you spend reading? 130 hours, or a 16 eight-hour days. What, you have a day job and need to work? Skip your TV and workout and spend two hours a day reading them and you need 65 days. By which time there will be another few products in the market and your attempt to be a literate consumer who looks at disclosure statements and reads the policy documents before buying a medical insurance plan will remain undone. If you had other products to buy, such as life insurance, investment plans, home loans, you should pretty much leave everything else and just reach for the brochures.

How is an average customer supposed to buy a product given the choices, complexity and fine print that most financial products carry? One way is for third parties to rate and rank products on various parameters to generate league tables that customers can look at in order to prepare a short list. For example, Indian mutual funds have more than 2,000 products in the market and one way to shortlist funds is to look at three independent league tables. We do the Mint50 list of 50 investment-worthy funds (find it at: http://mintne.ws/2ax8SYA). Morningstar and Value Research generate a star rating system. These ratings don’t just look at last year’s return but also metrics of risk and track record. Even after ratings and rankings, the final choice of a fund mostly needs the help of a financial adviser because of the complexities involved in building a robust portfolio.

We don’t see so many league tables in the insurance sector and there is a reason for that. We’ve just finished our third annual medical insurance rating process to cull out the good from the bad from the 65 policies with over 400 policy points. You saw the ratings earlier this week and can read the entire package at: http://mintne.ws/2aVjLUD. It took us (both Mint and our ratings partner SecureNow Insurance Broker Pvt. Ltd) more than two months of work to generate the ratings. Our ratings don’t just give you the cheapest plan but a sophisticated metric that rates a product across metrics of price, product benefits and claims experience. Our rating partner goes through every brochure and public disclosures put out by the Insurance Regulatory and Development Authority of India (Irdai) and public disclosures made by companies. The process is exhausting on many counts. The first being poor regulatory standards of data disclosure. For example, the disclosure on claims clubs together group and individual claims. Sometime back I used my company’s group mediclaim card to settle my mother’s cataract surgery bill. Earlier, I had used her own policy. The difference in the two processes was stark. Group claims are easier, faster and you usually get paid the full amount. Individual claims take longer, are rejected more and are not paid fully. Surely a rating for individual policies will need individual claims data? Our good regulator does not ask for data disclosure across the two very different pools. Worse, some companies club together all claims under one head, including government schemes such as Rashtriya Swasthya Bima Yojana. Our rating partner says that the difference in the claims number between group and individual policies is huge with some companies showing about 50% claims settlement experience. We’ve been highlighting this obvious information gap for three years now, but segregated data across policies is not part of the regulatory reform process.

Second is the errors we continue to find in the public disclosure that firms make. Our process is to download the public disclosures made by companies on their websites and mail them the data that we plan to use, for, say, claims. Three years ago, a large number of companies wrote back saying that their own numbers were wrong and updated the correct numbers for the purpose of our rating. These errors have come down after three years but continue to exist. However, two of the four public sector insurers who got back to us, did not correct their data even when we pointed it out. The simple fact of a public oversight by a third party is reducing the number of errors in companies’ public disclosures. Wonder if this role should not be played by the regulator, while we simply download and use the data instead of double checking their numbers.

End note: Note to policy makers and regulators: please understand what a marketplace based on full disclosure and financially literate consumers means. It means disclosures that are meaningful from the point of view of the customer and not regulatory ease, or worse, regulatory complicity with information-hiding firms. It means disclosures that are machine-readable to encourage comparison. And not uploaded PDFs. It means responding to evidence when it stares at you in the face. I don’t think it is an unreasonable request to fix data disclosure so that it is relevant to consumers, open to comparison and correct. If even these basics are not there, I’m not sure if you even understand the market you regulate.

Monika Halan works in the area of consumer protection in finance. She is consulting editor Mint, consultant NIPFP, member of the Financial Redress Agency Task Force and on the board of FPSB India. She can be reached at monika.h@livemint.com

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