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‘Health insurance policies cannot substitute emergency fund needs’

Photo: iStock
Photo: iStock

Summary

One of the biggest hurdles to insurance penetration in India is the huge trust deficit between insurers and consumers

The right health insurance policy helps insulate financial goals from any significant healthcare expenditure. And, it ensures that I don’t compromise on the quality of care ever," says 42-year-old Mahavir Chopra, founder and chief executive of Beshak.org—a Mumbai-based independent consumer awareness insurtech platform for individual insurance buyers., underling the importance of a health insurance policy for every individual. In an interview with Mint, Chopra also explains why one shouldn’t substitute health insurance for an emergency fund. Edited excerpts:

How did you start Beshak.org?

One of the biggest hurdles to insurance penetration in India is the huge trust deficit between insurers and consumers. I realized this during my stint at an insurance firm where I led a few businesses. One reason for this trust deficit was lack of proper information available to customers, especially where they had to buy long-term complex products like health insurance that also required significant financial commitment over a lifetime.

On one side, there were customers who struggled to make informed decisions. On the other side were distributors who merely offered standard comparisons, with support from a sales call centre, and were influenced by the commission-based revenue model. I strongly felt that customers deserved a neutral research platform that empowered them to make informed decisions about their family’s financial security. That was what led me to start Beshak.

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Graphic: Mint

What difficulties did you face during the launch of Beshak?

Building a unique mission-led model in India based on first principles is challenging. We had no reference point when we started. That initially made it very difficult for us to explain the concept to customers as well as investors (and this happens even now). We had no choice but to execute, learn from our mistakes, and execute again, which can be quite tough for a small team, especially when you are bootstrapped.

Who are your clients? How do you help insurance buyers?

We don’t work on a client-provider model. We have built Beshak as a community of well-meaning people and offer insurance seekers the best blend of technology and community services that ensures complete peace of mind. Technology helps keep the advice unbiased. Customers can make regret-proof decisions based on deeply personalized recommendations that match their needs against more than 150 products in the market. The community ensures the availability of human expertise if and when things go wrong. Insurance is largely offline after sales. The community of curated experts handholds the customer—from purchases to renewals to claims.

What is the size of your company? How do you generate revenue?

We are quite small. There are 14 team members located across 10 cities in India. We generate revenue in two ways. One, we charge a subscription fee from clients for the advisors listed on our platform. Two, we offer our content and research services to insurance platforms in the country.

How do you give unbiased advice on insurance products?

It’s very simple. We have decoupled the advice from the advisor in the community. The advice—the product recommendation—is generated by our proprietary algorithm that uses our independent research across more than 100 products. We have ensured that the research is 100% unbiased by not affiliating ourselves with any insurer or platform for distribution, marketing or sales.

The advisor does not have any role in product recommendations. Only after product discovery is finalized, the advisor handholds the customer from purchase to renewal to claims.

What type of clients approach you, and what are their requirements?

This is very interesting. Usually, diligent customers who want to get their insurance right approach us. These clients have done their initial research and realize the importance of the deep research and human expertise Beshak brings to them.

What kind of health insurance do you have? How did you select it?

I have individual covers for my parents and my family. My father bought coverage from a PSU insurer in the late 1990s. Around 10 years ago, I bought a super top-up plan for my parents. I also purchased personal health insurance for my immediate family and critical illness policies for my wife and me. Besides, I also have term insurance and accidental disability comprehensive cover for myself.

Have you or your family members ever required hospitalization?

I was involved in a minor accident during my college days but that did not require hospitalization. Later on in life, I underwent a FESS (Sinusitis) surgery. My father was diagnosed with meningioma (a non-cancerous tumour of the brain ) and underwent a surgery. Fortunately, we didn’t face any financial problems because he had mediclaim (medical insurance) . And it ensured that we got cashless treatment. My parents and in-laws have had to undergo minor surgeries like cataracts and hernia—all paid for through insurance money. Although this may sound biased, I haven’t paid much for any hospitalization so far. Insurance took care of it. The out- of-pocket expenses has been very minimal, barely 10% of the total bill.

How much insurance coverage do you have at present?

I have a base health policy for my parents for 2 lakh and a top-up policy of 5 lakh. I have a floater plan of 10 lakh base cover for my family plus a top-up policy of 20 lakh. Apart from this, I also have a critical Illness plan for 25 lakh covering the top 12 diseases. However, I need to upgrade this plan. I also have a comprehensive accident policy of 1 crore. Overall, I pay around 1,32,000 a year on health insurance premiums. It might look like a significant amount for many, but it is not enormous if you compare this with the coverage I get from policies. Also, this amount would be less than 1% of our annual investments.

How much have your health insurance premiums increased over the years?

My parents‘ health insurance premiums have increased significantly - especially after they turned 70. Every year during renewals, we check the premium and evaluate whether it’s worth paying for the coverage. However, we continue doing so, knowing that our parents are getting old and the probability of hospitalization is only rising. And, we find the premiums fair when we do a quick back-of-the-envelope calculation. I say so because the insurer has paid many of our claims. We have confidence in health insurance and in how it works.

My policies‘ premiums have risen. But since I understand how this works and its value, we haven’t been worried about it. We are confident that it does help us get quality healthcare without worrying about cost when needed. Our family (and even many in the Marwari community that I belong to) has been investing in health insurance for years . It’s evident that we don’t have to compromise on the quality of healthcare.

Do you have an emergency fund?

I have an emergency fund. That helped me a lot at the time I founded Beshak. The pandemic hit in like 20 days. Our plans were stalled, and we had no earnings for 6-8 months.

However, one should understand that health insurance—especially a critical illness plan —is not a substitute for an emergency fund. One tends to forget that critical illness plans are insurance plans based on certain principles. Insurance is a financing mechanism, but it is not meant for emergencies.

The contract works under specific terms and conditions (like waiting periods). The payment under the contract could be delayed or declined. You should have an emergency fund to pay for emergencies. This may later be replenished by the claim received from the critical illness plan.

Have you taken any additional riders along with the base health policy?

The ‘Super No-Claim Bonus’ provides an additional bonus over and above my base cover. This way, my coverage ensures I have enough buffer. I have also taken a non-medical expenses rider during the pandemic - as non-medical expenses like PPE kits, consumables, etc., had formed a sizeable part of the hospital expenses, especially during the 1st wave of Covid. I continue to renew it, as it helps me further minimize my out-of-pocket expenses at a meagre cost.

What is the significance of the right health insurance plan ?

Two things. One, it insulates my financial goals from any significant healthcare expenditure. Many feel that healthcare expenditure could be funded by earmarking specific savings for such emergencies but health insurance provides me good cover and can be renewed. It is priceless.

Two, it ensures I don’t compromise on the quality of care. We have been able to access the best hospitals and doctors in the country without worrying about how we will fund it. Most people don’t realize this till they see a significant hospitalization in their family.

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