Published in Mint on 31st July, 2017.
Suppose you are in the market for a health insurance policy. Do you know how much time you need to read through at least 60 policy documents? Assuming it takes an hour to read one brochure, it will take you 60 hours or little over a week to go through all the plans if you pore over them for 8 hours a day. This means you need time off from work to browse plans for a week. Other option is to simply buy what the agent sells and sign on the dotted line and bring home the satisfaction of being insured. Mint recommends neither. It’s not possible to sift through so many plans and buy a financial product without understanding it fully never ends well.
At Mint, we realise the obvious information gap in the market with product information overload. To fill this gap, we began decoding health policies in 2013 with our knowledge partner SecureNow Insurance Broker Pvt. Ltd. Four years later, in its 5th wave of the exercise, we are happy to report that not only is this exercise helping you, it is also putting pressure on the industry and the regulator to take disclosures more seriously.
The Mint SecureNow Mediclaim Ratings (MSMR)-2017 trawled through 60 products and over 400 combinations to identify the ones that work for you at different age groups and for individuals and families. It took us nearly three months, making MSMR one of the most extensive and exhausting exercises in financial product rating in this space.
Prioritizing the essential parameters and assigning weights is how the process of MSMR starts. But putting it together involves chasing insurers for data, gleaning information available in the public domain and reconciling the numbers with what the insurers send; pointing out obvious errors in the public disclosures and then ironing out discrepancies. This year we also got a lot of insurer’s feedback on how to improve MSMR—some constructive, some merely pushing for more product features to be added.
The industry is constantly innovating in the health insurance space by adding bells and whistles; so we spent a considerable amount of time sifting out the noise from the real value-add. From a customer’s standpoint, we like policies that make buying health insurance affordable, come with fewer restrictions and are offered by insurers with a good track record of settling claims with fewer claims-related complaints. But from an insurer’s viewpoint, a scoring system that only focuses on the basics is a serious drawback. That’s because the extra benefits add to the cost that pulls the ratings down. So last year, even as we focused on making policies ‘surprise-proof’ by continuing with our ratings parameters, we mentioned the extra features in the footnotes. This year we have gone a step further by including some of the features in the ratings that we think need to be recognized and developed further. This year we also looked at pricing differently.
So before you jump to the ratings tables, spend some time here and read the methodology carefully.
Our ratings criteria are divided across three broad parameters of price and features of a health insurance policy and claims experience of the insurer. Price or premium of a health insurance policy gets a weightage of 35% for age bands up to 60 years of age. In the age band of 75 years, features or policy benefits gets relatively more importance so the price weightage comes down to 30% whereas the weightage on policy benefits goes up by 5% to 50%. In both the categories, the weightage on policy benefits is more than the price. The weightage on claims experience stays at 20%. We have rated health insurance plans across four age bands of 30 years, 45 years, 60 years and 75 years.
A common reader feedback to us is that her policy saw a sudden spike in premiums on renewal. We have tried to address this by averaging the premiums across high age bands and then rating the average premium. So a product that may be the cheapest at 30, but ends up being the most expensive at 60 years of age won’t get full marks even in the 30 age category. So for a 30-year-old, we looked at the average premium at age 30, 45 and 60 years. For a 45-year-old, we took the average premium at age 45 and 60 years. For ages 60 and 75 years, we didn’t take the average this time because most policies stop offering health insurance to fresh customers after 65 years of age; so getting the premium was not easy. Next year, we will build the averages in these age bands as well.
The premiums are divided into four buckets. The top bucket (top quartile) has plans with the lowest premiums and the last bucket (bottom quartile) has the most expensive policies. The cheapest policies get full marks and the most expensive policies get a zero.
For the non-senior citizen category, we plucked out restrictions that are standard across products. These include features like waiting period on specified illnesses and caps on payment. This is not the same as waiting period on pre-existing ailment that continues to get a weightage of 15%, but a waiting on specified ailments, like hernia, which typically comes with a standard waiting of 2 years. Two, we removed co-payments (a co-payment is when you pay a certain percent of the claim amount) from this category as most policies don’t have a co-payment clause unless it’s for specific features or policies are priced differently according to cities.
For senior citizens, 75 age category, each parameter exists with a weightage of 5% each. A typical senior citizen product has co-payment and comes with an extended list of waiting period and caps on specified ailments to make it affordable and minimise the risk.
Parameters of waiting period on pre-existing ailment and sub-limits on room rent continue with a weightage of 15% each. Other than shorter wait time on pre-existing ailment, policies with no sub-limits on room rent is important because a cap on room rent translates into a cap on other costs like doctor’s fee.
This year we added four extra features in the non-senior citizen category. Two of them made their way to the senior citizen category as well. Each of these parameters has been given a weightage of 2.5%.
First, we included wellness programme as a category and gave full marks to policies that induce positive health activity and offer a monetary reward to the customers. Second, policies that come with a critical illness cover got full marks. Third, we added a restore benefit which is now a very popular feature. This feature reinstates the sum insured once it’s exhausted in the year, but typically the reinstated cover can’t be used for the same illness in that policy year or for instance, hospitalization in the cover got exhausted. But it can be useful for family plans and where the sum insured is low.
Fourth, we have included the outpatient department treatment (OPD) feature which is very important but the products are underdeveloped. Even policies that offer them are restrictive. Most cover only OPD treatment related to dental treatment, ophthalmology and Ayurveda. Going forward we plan to nuance this parameter to give full marks to policies with comprehensive cover.
For the 75 age band, we have not given priority to no-claim bonus and restore benefits, as one can tackle inflation by buying sufficient cover. Also, given most policies don’t come with an in-built critical illness cover for senior citizens, we have removed that as well but retained wellness programme and OPD benefit that becomes very important at that age.
When you go over the features, keep in mind that many insurers embed these features whereas some offer them as optional cover. We prefer optional covers as that makes health insurance more affordable with the option to feature rich your policy. We have not factored this in the rating, but this gets reflected in the pricing. (Read the methodology for more details on features.)
Our ratings have also looked at claims and complaints record of the company and it gets a weighage of 20%. Traditionally we have tracked three aspects: percentage of claims settlement, duration of outstanding claims and complaints received by the insurer. We removed duration of outstanding claims as regulations have fixed the time limit within which claims have to be paid and specified penalties on late payment.
Claims settlement gets a total weightage of 15% and claim complaints get a weightage of 5%. The companies with a stronger claims settlement history get a higher rating.
We suggest you earmark at least an hour—instead of taking a week off after a crash course in health insurance 101 or blindly following your agent—to understand the ratings and then choose your policy. We are showcasing only the ‘A’ rated plans here; for a full list, visit our website: www.livemint.com/mintmediratings2017. After you have understood the parameters that we have taken to rate health insurance plans for you, read the methodology that further slices the parameters for a better understanding.
How to read the tables
1. Decide if you want a policy only for yourself or a family floater.
2. Choose your age. We rate policies across four age groups—30, 45, 60 and 75. The methodology on the next page explains why we chose these bands
3. Choose the amount of cover you want.
4. From the companies you see in the chosen box, don’t pick the first one
5. Go deeper into the ratings. Look at the scoring system table.
6. The cheapest policy is not the best. The policy that works for you will be a combination of price and policy benefits that you need
What’s new in the ratings
1. The ratings cover 23 insurers, 60 products and over 400 product-age-sum assured combinations.
2. Higher sum assured categories of Rs10 lakh, Rs20 lakh and Rs50 lakh have been considered, keeping in view rising medical costs
3. In the Rs20 lakh category, there are 32 products this year compared to 15 last year
4. Total number of A-rated policy combinations—100+
5. New features added: Wellness programme, OPD, restore and critical illness cover
6. For age category 30 years in family floater plans, the cover is for two adults and one child. But for age category 45 years, the cover is for two adults and two children