There are 3 solutions to tackle issues regarding insurance woes on a large and sustainable scale
Insurance inhabits two distinct worlds. In the first world it occupies, it promises concern and care; search for popular insurance advertisements anywhere in the world and you will find beautiful creatives that bring a tear to your eye. And this promise of security is the perspective I love. However, once you scratch the surface, a second world emerges. One where people have bought the wrong products, feel cheated and struggle to find solutions. This, too, brings tears to the eye, but these are mostly just tears of frustration.
Last month, there were five different incidents involving close family and friends that brought this second, less attractive world, into the forefront.
My wife, a surgeon, has been buying professional indemnity insurance for several years from a firm specializing in insurance for doctors. It’s a large entity catering to about 30,000 doctors across the country. While reviewing her insurance, I was surprised to find that the firm had charged four times the insurance premium as a fee. The rationale was that premium for three years had been taken upfront and a service fee roughly equivalent to an annual premium charged. In my view, at least four insurance laws were violated—the insurance does not have a three-year option so the sale is not valid; premiums have to be deposited with the insurer within 24 hours, which has not happened; a service fee cannot be bundled with premium; and finally, the company does not appear to be a licenced distributor. I will eventually recover the Rs.15,000 but it’s going to be a long process. I wonder if the other 29,999 doctors are aware that they are overpaying, and if they are, how do they plan on recovering their money?
In another incident, a friend’s equipment worth Rs.50 lakh was burned down. The insurance surveyor said the claim is not payable since it was caused by a faulty switchboard. However, he was willing to give a “favourable” report for a fee. Should one escalate the matter with the insurer at the risk of not getting any money or just pay the bribe?
The third story is about when I went car shopping during the shraadh period. This inauspicious period has the best discounts, or so I thought. The dealer’s price list set insurance premium at Rs.45,000. I know the fair price of that insurance is Rs.20,000. So, who checks to see if the premium has been inflated to recover discounts given elsewhere?
The next incident is about relatives who bought fire insurance for their home that was under construction. Unfortunately, the agent forgot to mention that a standard warranty in the policy was that no construction was taking place on the site. Now that’s Rs.20,000 burnt up, literally.
The last story is about a business colleague who had met with an accident. His medical claim of Rs.5 lakh was declined because the insurer concluded he was drunk when the road accident took place. Now, I’m not clear as to how that decision was made because the doctor’s note and medico-legal report clearly states that the patient was sober.
The way forward
How does one address these issues on a large and sustainable scale? We need institutional solutions; three, in fact—technology, process and self-regulation.
Smart use of technology materially cuts down fraud and customer grievances. For example, insurers in several markets use pictures of damaged vehicles to determine repair costs. Due to this, the dependence on an intermediary to make an assessment or negotiate with dealers is reduced. An online discussion board or a Facebook page can quickly identify as well as resolve customer grievances. If the Prime Minister can have a website where people can voice themselves, insurers should consider that as well.
Processes is an area that general insurers can learn from life insurers. Shouldn’t all retail customers get a welcome call to check if they understand the product they have bought and the premium paid? Why can’t insurers send an email or SMS explaining policy terms and exclusions to all customers?
Self-regulation when done honestly can make grievance redressal efficient. Today, aggrieved customers approach the ombudsmen or insurance regulator for resolutions. Both these institutions are short on capacity. Regulatory processes require a deliberate step-by-step approach before an order is issued. This is one of the reasons why the time between identifying an issue and passing a final regulatory order is often over a year. The waiting period for an ombudsman ruling is also long. Wouldn’t it be more effective if the General Insurance Council established a group, staffed by independent experts, to look into customer complaints and take speedy decisions to which all members abide? In fact, one does not even need the Council to do this. An insurance company can simply set up its own independent body to look into complaints. Steps such as these are in the industry’s own interest and welfare.
Postscript: The distributor who sold the doctor’s professional indemnity called to say they will refund the excess money charged. That’s a small step forward.