(Photo: iStock)
(Photo: iStock)

Opinion | There is room to Improve how insurance-related information is reported

Claims, grievances and persistency must be broken down by product

I learnt about flexibility in statistics when working as a greenhorn consultant with an international beer major. A seasoned client executive showed me data conclusively proving that beer was healthier than milk. It was many years later that I realized that the data was incomplete because it did not tell me if beer drinkers also drank milk.

Small changes in definitions or presentation can alter the meaning completely. Within the insurance industry, there has been tremendous progress in sharing information. Every insurer releases over 50 pages of data each quarter and since there are over 50 insurers that’s 10,000 pages a year. The Insurance Regulatory and Development Authority of India (Irdai) publishes its own independent quarterly and annual reports. This has made decisions in insurance more informed. Buyers now ask about claim settlement, persistency and solvency margins. Advertisements can only use statistics following standard definitions.

But there is room to improve. Specifically, in the way grievances, claims and persistency are reported. On grievances, the current definition is restrictive because only written complaints are recorded as grievances. Social media grouses or phone conversations with your agents are not classified as grievances which means that complaints are understated. Even with written complaints, there are differences in what is counted and how systematically that information is captured. Correcting this statistic will increase the reported grievance rates but will make for a better measure. On the reported parameter of claims complaints per 10,000 claims, there are two insurers that report this on a base of 10,000 policies rather than claims, incorrectly lowering their published complaint rates.

On claims, the regulator had specified that the category of “claims closed" must be removed and classified as outstanding, settled or repudiated. Claims closed were those that an insurer removed from their active records because the patient failed to send all the information asked for. Typical examples of such requests were old medical case histories. This removed situations where insurers could keep asking for documents until claimants were worn out. However, several insurers reported claims closed last year. Another problem is the way time to settle claims is measured in public disclosures. The reported numbers for claims settled within three months is over 99% for most insurers. But those that have filed reimbursement health claims know that settlement can take much longer. What’s going on? The issue is that the reported settlement time is measured from when insurers receive all the information they want. It does not measure time from when you inform an insurer of your claim. I reviewed 1,000 health claims and observed that just about 50% of the claims are settled within three months if time is measured from the first intimation rather than receipt of all papers. I accept that patients can delay filing of information inordinately and insurers are not responsible for this, but the information should be published in any case. If this settlement time is properly measured, there will be an incentive to reduce documentation.

On persistency, the definition for life insurance products should exclude single-premium and group sales. The impact of including single premium plans is to increase persistency, and combining individual and group business can hide the issues of individual insurance. In health insurance, persistency rates are not published but should be. They are important because health insurance is designed to be retained life-long and continuity is necessary to claim for pre-existing conditions. Yet, people lapse their health insurance and buyers should know how often and why.

There is an opportunity to further detail published information. Claims, grievances and persistency must be broken down by product because the product choice is as important as insurer selection. There can be significant differences in product performance across the same insurer. Death claims should be published for term plans. All of this will mean many more pages of data to pore over but it is a worthwhile pursuit.

Inaccurate information matters—buyers have specific concerns around the stability of insurers, claims experience, product features and performance and look to data for answers. Incorrect information will lead to poor outcomes. However, sometimes wrong conclusions do not matter—in the beer versus milk case, I was happy to be misled.

Kapil Mehta is co-founder, www.securenow.in

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