Great strides made in insurance, but there is still a long way to go

Two decades ago when I joined the insurance industry, it had just about been privatized. “But will they pay a claim?” everyone asked me about the sector. My guess is that, in the private sector, fewer than 1,000 death claims had been paid until then. So, disguising my under-confidence, I reassured others. That reassurance was not misplaced. Today, over 1 million death claims are paid each year. If I include health and other claims, the numbers are much larger. Over the years, there have been many changes that have made this possible.

The best development, in my view, has been introduction of regulation to safeguard policyholder interest. Today, insurers cannot deny a life claim after three years and a health claim after eight years of buying an insurance policy; health insurance products are renewable as long as you live, irrespective of claims you make; premiums cannot be changed based on your claim history; key definitions such as pre-existing health conditions are standardized and reasonable; life insurance illustrations must fall between a sensible 4% and 8 % and be signed by you; charges in ULIPs (unit-linked insurance policies) are capped and, no exclusions are allowed in life insurance, except suicide, in the first policy year. These steps, taken gradually over the years, have contributed to such high claim payments.

A second good change has been increased competition which has rapidly improved products. A decade ago, in 2013, 75% of health insurances had a pre-existing condition exclusion for 4 years, the highest allowed. Last year that was under 50%. Specific disease-wise caps have all but gone (only cataract restrictions stubbornly hold on), once-unique benefits such as restoration of sum assured, if fully used up, are now standard. Gone are the days when life insurance would not pay a death benefit in the initial policy years. In motor insurance, features such as zero-depreciation cover (that makes insurers pay a claim without any depreciation-related reductions), engine covers that pay for stalled engines and tyre burst add-ons are relatively new introductions. Critical illness plans that used to cover fewer than 10 diseases, now routinely cover over 20. Many have over 50 diseases included.

Competition has increased the number of products available exponentially. For individual health insurance and ₹10 lakh sum assured, I had counted 34 health insurance products in 2013; today, there are over 85 plans. Term insurance as a category is just about 15 years old. Buying an insurance is so much easier now. Last month, my mother, who is 75, bought a large top-up health plan with just a medical tele-underwriting phone call. In previous years she would have had to physically visit the lab for tests. We now shift seamlessly, without losing benefits, from one health insurance to another. This portability was not possible a decade ago.

Finally, the information publicly available shines the spotlight on insurers. There are quarterly public disclosures, Irdai’s annual reports and statistical handbooks, analyst reports for listed insurers, IBAI’s claims handbook and broker voice surveys, These make the differences across insurers transparent and allow policyholders to make informed choices.

But, there is an unfinished agenda. The most important of which is to strengthen complaint handling. Today, there are four options that customers have to resolve a grievance: the grievance officer of the insurer, the Irdai, the ombudsman and various courts. Each of these has issues. I have seldom seen grievance officers overturn their own company’s decisions, the Irdai cannot investigate all complaints and escalates them back to insurers, the performance and inclination of ombudsmen varies quite a bit and in cases of bad judgements there is no appeal possible, and the courts take several years to close matters. I think building a complaint handling process that is timely, easy for policyholders to access and fair is a big priority.

There is an opportunity to further strengthen policyholder rights, specifically in health insurance. Insurers can change policy wordings on renewal. Over years, the changes may be significant; policyholders are not aware of these changes and learn about them when they file a claim. Policyholders should sign-off on contract changes and be given meaningful options if they do not agree to the modifications. Finally, though there have been big strides in life and health insurance, home insurance has stood still. The risks here are mostly unrecognized. For example, did you know that there are 40 to 50 earthquakes over 5 on the Richter scale that impact India each year? In Delhi, there are 600 burglaries or thefts reported each month and about 75 fire calls every day. These risks are covered in a home insurance and its use must be stepped up through awareness, offering cashless repairs (as in health insurance) and minimising product exclusions.

Today, all categories combined, over 60 million claims are paid each year. Yet, I continue to be asked “But will the claim be paid!” The answer, I can say much more confidently now, is yes.

Kapil Mehta is co-founder, Securenow, a tech-enabled insurance broker.