Max Bupa Health Insurance recently re-launched two health insurance plans. Ashish Mehrotra, a banker-turned-insurer who is now the managing director and chief executive officer of Max Bupa, spoke to Mint Money about what the re-launched products will offer. He also gave some insight into the kind of customization the customers can expect, as the insurance market evolves. Edited excerpts:

Coming from the banking sector, how different do you find the health insurance industry?

The health insurance sector is at the cusp of growth, the space where consumer banking was 20 years ago. Health insurance is one of the fastest-growing segments in the banking, financial services and insurance (BFSI) space and is growing exponentially, almost three times the GDP. This makes it exciting and interesting in terms of what you can create for the customers. Gross under penetration coupled with rather complex products create a great opportunity in the retail space.

You have re-launched your indemnity product called Heartbeat, and also Health Assurance, which is a defined benefit policy. You seem to be re-launching the entire product suite. In the industry, typically when insurers re-launch they add a few features and increase the premiums. So, how will these plans be any different in terms of features and pricing?

With the launch of Heartbeat in 2010, we introduced any-age enrolment and lifelong renewability—which later found its way in the Insurance Regulatory and Development Authority of India (Irdai) regulations.

We have further enhanced the product by adding features such as reduced initial waiting period, which is only 30 days now.

The pre- and post-hospitalization coverage is for 60-90 days, respectively, and there is no room rent capping.

The policy also offers enhanced maternity benefits, and coverage for alternative treatments like Ayurveda and Homeopathy.

There is a nominal increase in the plan due to enhancements in the product. A customer must evaluate whether it makes more sense to own a policy with a lot of restrictions or pay a little extra but have no restrictions in the form of sub-limits.

Our enriched version of Health Assurance is a guaranteed cash benefit health insurance plan with many industry-first features tailored to provide a combination of covers. This plan packs in critical illness cover, accidental death or permanent total or partial disability cover, and offers daily hospital cash benefit. The plan offers a wide range of sums insured from Rs3 lakh to Rs2 crore for critical illnesses and Rs5 lakh to Rs5 crore for personal accident covers. Our critical illness cover is one of the most price competitive offerings.

The industry is gearing up for customization in pricing, where somebody who buys health insurance at a young age, will get a better price than someone who joins late. How will this change the market?

Healthcare costs in India are rising, as treatments have become more sophisticated and the cost of medicines has gone up. All this has contributed to soaring medical inflation, which stands at 13-15%.

To counter this, customers must have adequate sum insured for their health cover.

As insurers, we need to build a strong proposition for younger segments to see value in buying health insurance early.

You will not only be serving out the waiting period at a much younger age, there is little risk of being refused a policy at an older age, or having to buy a policy with lots of exclusions. In the new age of digital healthcare, products and business models need to be built with the customer as the focal point. We have already started doing some background work on this.

What about customization in terms of geographies? Can it be so nuanced that a person living in a polluted city pays a higher premium? But will they come with restrictions like co-pay for treatment in a different city?

If there are geographies where you see higher incidence and costs, then insurers will have to re-price the premiums for such geographies.

You can’t have people living in certain parts of the country subsidizing others.

If you go to larger cities, the lifestyle is different, the cost of treatment is high and so is the incidence rate. So, differential pricing is fair.

Our indemnity plans offer attractive geography-based pricing, wherein customers can avail a discount on the basis of their city of residence. Under our Heartbeat plan, there aren’t any geography-based co-payments.

In terms of customization, the industry has still not been able to design OPD (outpatient treatment) related products.

What we have so far are products designed to get tax benefits. The challenge with OPD products is that you need to have a strong network to make sure that you are able to deliver the promise on time.

So, it’s important to get a partner to address the network challenges, because the policyholder should be able to consult her general practitioner and pay cashless through her OPD policy.

Plus, it needs to be cashless in real time. While there are a few such products already in the market, the cost is very high, as the products come with 80-90% utilization rate. But you will see more such offerings as the insurance industry evolves.

Insurers are launching disease-specific products. These plans insure against a particular ailment. What is your take on these plans?

You don’t buy health insurance because you want to insure yourself against one particular ailment. You buy a health insurance cover so that all your medical expenses are taken care of. Disease-specific products address some needs, but they also leave a large number of needs unaddressed, which can only be fulfilled by a comprehensive health insurance plan. Also, you can’t predict an occurrence for a specific disease and buy a policy for that ailment. It’s important to buy products that address all your needs.

The industry has seen some extreme price corrections in the past, where premiums have more than doubled on renewal. Why was that the case earlier, and do you think that pricing has stabilized now?

When you price a policy, you need to adjust for three components: medical inflation, incidence rate of hospitalization and severity.

Your pricing needs to be fair and reasonable and those who price less initially, have to eventually increase the pricing.

The market has certainly stabilized as the regulator is now keeping a close watch and the industry has become far more conscious with regard to pricing and underwriting risks. We want to on-board our policyholder very consciously because we have to renew the policies for life. Hence, we price our products keeping all the factors in mind.

While technology is helping insurers with quick turnarounds on pre-authorization of claims, the settlement process is still not smooth and as a result patient discharge is still marred by delays. What steps are you taking to address this issue? Some companies have started involving third parties to develop software to make the connection between hospitals and insurers smoother.

We believe there are a few experiences that we must control. So, we didn’t outsource our claims, we didn’t outsource our underwriting and we promise to administer all cashless hospitalization requests in 30 minutes. We have our own tele-sales team, because these are core pillars to win in the market place.

Having said this, the biggest challenge for the industry right now is the lack of adoption of a standard healthcare classification system.

So, for you to put the information in a codified version in your system and then approve it, can take about 2-4 hours. In 95% of the cases, we are able to do this in 4 hours, but we want to bring it down further.

Currently, the information comes in via fax, which is digitized at our end but we are eventually looking to connect our servers directly with our hospital partners, so that the whole process is automated. We will focus on it this year.

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