Published in Business Today on July 25, 2019
You have to have health insurance if you don’t want to strain your finances due to a medical exigency. You also need life insurance to provide financial security to your loved ones in case something were to happen to you. This involves studying the features of multiple policies. Many people often delay or don’t buy insurance to avoid the hassle of doing this. And, even if they buy, many find it difficult to manage multiple policies and ensure timely premium payments.
To reduce these problems, in 2009, the Insurance Regulatory and Development Authority of India, or IRDAI, came out with regulations allowing health and life insurance companies to join hands and offer combi plans offering both health and life covers. But insurers have started launching such plans only recently. Right now, four such plans are on offer.
Combi Plan Explained
It is a combination of two insurance policies offered by one health and one life insurance company jointly. “Two providers – one health insurer and one life insurer – join hands to offer the product. Both underwrite the proposal and accept the risk. The customer gets a single policy with separate policy schedules for health and life,” says Anand Roy, Executive Director and Chief Marketing Officer, Star Health and Allied Insurance. Typically, the products offered under both health and life insurance are existing products. Insurance companies can offer existing products without changes but the final combi plans have to be cleared by the IRDAI. HDFC is offering its Click2protect with Apollo Munich’s health plan. Bajaj Allianz Life and Bajaj General Insurance are offering iSecure and Health-Guard under the combi plan (these are their existing products).
Each insurer does separate underwriting. The buyer is informed about the premium for each portion and can claim tax deduction for life insurance premium under Section 80C and health insurance premium under Section 80 (D).
The two insurers sign a memorandum of understanding on the modus operandi of marketing, service, and sharing of common expenses.
There is one lead insurer who is the point of contact for the insured. Generally, it is the health insurer provider, as the number of health claims is likely to be higher. But the customer can contact either insurer and he or she will be directed to the respective insurer in case of a claim. “The customer can connect with either Star Health or IndiaFirst Life and they will, in turn, handhold the claimant as needed,” says Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance, which is also offering a combi product.
Convenience: You don’t have to research multiple health and life insurance policies. You need to fill one form. A medical check-up is also done only once. “There is a single medical underwriting process for both covers. The payment is also made to a single entity,” says Abhishek Bondia, Principal Officer & Managing Director, SecureNow Insurance Broker. This helps insurers save costs and expand their customer base “It is basically gaining from each other’s customer base. The choice of Royal Sundaram (as a partner) was specific to us as they are a bigger player in south India whereas we are stronger in the west and north. We can use each other’s customer base to expand our markets. Essentially, we cross-sell,” says Souvik Jash, Appointed Actuary, Aegon Life Insurance.
Cost-Effective: In order to popularise the products, insurance companies are offering a discount on the premium in the range of 1.5 percent to 5 percent on both life and health insurance premiums. “If you buy the two policies separately and the total premium is Rs 10,000, in a combi plan, you will pay Rs 9,500, which is a discount of 5 percent,” says Dheeraj Sehgal, Chief Institutional Business Officer, Bajaj Allianz Life.
Just like any other product, combi plans have certain limitations, which need to be kept in mind if you plan to buy these products
Limited life cover or policy term: The new combi plans being launched have better features but there are some limitations. For example, India First is providing cover for a limited period of five years only, while others have different tenures, going up to 40 years. This can create a problem as the premium will go up at the time of renewal. “Life insurance policies have a fixed term. The premium remains fixed for the term of the plan. A short tenure such as five years for life cover means the premium has to be reset after five years,” says Abhishek Bondia of SecureNow. Also, India First is providing a maximum cover of only Rs 9 lakh. But most plans don’t have a cap on the sum assured under life insurance. Therefore, before buying, check the policy details carefully.
Discontinue or port the policy, discount will go: You have the option to continue with one of the insurance providers. You can port (the healthy part) or discontinue (either health or life insurance, like portability, is not possible under life) and continue with one policy. However, if you do so, you will have to forgo the discount.
Riders: You may not be able to buy riders with these policies. Some plans are offering inbuilt features like personal accidental cover and disability insurance but the offerings are limited compared to what you get in separate policies. “As a product, riders are allowed, but in order to avoid cross-cannibalization, most combi products will not offer riders,” says Souvik of Aegon Life.
Should You Go For It?
Combi plans offer ease of buying and convenience. These are new and may not provide the extensive coverage you are looking for. But before buying, explore the features and coverage provided by standalone products. Also, the options are limited in terms of offerings as compared to standalone products. But if you don’t have the time and knowledge to evaluate different products on your own, it makes sense to explore combi products, as it is better than not having a cover. “If an individual is not savvy in financial planning herself or does not have access to quality advice, a combi product is a good way to get dual coverage,” says Abhishek.
“If a person has either health policy or life insurance (and is underinsured), he/she can explore the combined policies,” says Mallesh Reddy, Co-founder, and CEO, InsureMile.