Are those discounts offered by health insurers for real?
3 min read . Updated: 15 Mar 2023, 11:54 PM IST
Premium- Buyers need to focus on the salient features of a health policy rather than the discounts
- Some insurance experts claim that discounts on premiums are merely a marketing gimmick
People love discounts and companies know that only too well. Corporates use discount strategies for various reasons, from rewarding loyal customers to attracting new ones. And health insurers aren’t any different when it comes to discounts.
Here is what an insurer typically offers: A discount on the premium when you buy a health insurance policy online or renew an existing policy. The discounts depend on whether you are a salaried individual, insuring a girl child under a family floater plan, or even porting your policy within three years of buying it. In such cases, you can get a 5% discount on the premium. People who maintain a good credit score or are an existing policyholder can get a 7-10% discount on the renewal premium, depending on the insurer they are dealing with.
Even as discounts have become very important for companies to lure customers, it is important for policy buyers to understand the types of discount offered by insurers and whether these are genuine or mere promotional strategies. Naval Goel, founder and chief executive officer of PolicyX.com, says, “The pricing strategy of insurers depends on various factors such as claims made in a particular segment, coverage of the product and the benefits made available to policy subscribers. The discounts, too, are based on these factors and are put in place solely for promotional purposes.“
However, Sanjeev Govila, a Sebi Registered Investment Advisor (RIA), says that customers get discounts because of competition in the market. So, some insurers offer huge upfront discounts. “However, one should tread carefully where it concerns discounts. The display of so many discount blocks on websites can overwhelm you until you read the fine print at the bottom of the website or policy document," Govila says.
Adding to this, Amol Joshi, founder of Plan Rupee Investment Services, says, “Some websites list nearly 15-20 types of discounts, totalling more than 100%. However, when you read the fine print, you will know that the maximum discount offered is just 35%.“
Some insurance experts claim that discounts on premiums are merely a marketing gimmick. For instance, some insurers give a 2.5% discount to vaccinated individuals, which means that this discount is generally meant for all citizens.
Abhishek Bondia, principal officer and managing director at SecureNow.in, says, “Discounts offered by insurers need to be double-checked for effective value. Often, the price of competing insurers for the same benefit could be lower even without any discount. Also, the discounts could be at the cost of lower benefits. For instance, if the insurer offers an online discount, you will not get the services of a financial advisor who could help you in filing a claim. Or, if the insurer offers a discount based on your location, then it could mean restricting your hospitals to select zones.“
Insurer Vs web aggregator: All buyers should necessarily compare the discounts offered by insurers on their respective websites and that provided by a web aggregator. In some cases, the aggregator offers a lower premium for the same policy and coverage. Yet, an aggregator may not necessarily give discounts on every policy. Govila says, “The discounts offered on websites of standalone insurers are meant for individual retail clients. Aggregators have a larger customer base and so enjoy huge pricing power. That is why aggregators offer better rates than insurers."
However, Goel said, “In some cases, the insurers have a tie-up for a specific policies with web aggregators and offer additional discounted rates."
So, some of the discounts that reflect on an aggregator website is because the insurer wants to promote and sell that particular policy.
To be sure, there are several ways in which an health insurer can bring down costs. These include multi-year policies, voluntary deductibles, co-payments, etc. The moot question then is why do insurers offer discounts. Siddharth Singhal, business head- health insurance, Policybazaar.com, says, “Discounts, rewards and incentives are offered to win over those who are hesitant to buy health insurance" Bondia says, “These discounts help in differentiating the overall value proposition and frame a narrative that can help insurers engage better with the policyholders."
Mint take: Check for standard parameters instead of discount offers. For instance, you must check the insurance company’s claim settlement ratio and the total amount of claims settled by the insurer. Second, opt for adequate sum assured at an affordable premium. Third, look for a cashless hospital network, so you don’t have to pay from your pocket during hospitalization. Fourth, check out the waiting period; the lesser the waiting period, the better it is to cover pre-existing diseases. Fifth, ensure that your health insurance policy has no sub-limits or room rent capping.
