What young adults think about insurance

Published in Mint on JUN 15 2016, Written by Kapil Mehta
I signed up on Quora, a social media site, about a year ago. On this site, anybody can ask a question, directed to specific people. Readers validate answers by voting. The site is frequented by engineers, entrepreneurs, students of Indian Institute of Technology (IIT; my alma mater) and other such nerdy folks. According to Alexa, a company that measures online traffic, Quora is the 22nd most popular website in India. Although Quora does not issue official age data, users are typically in their 20s. That is why analysing questions on the site provides deep understanding into what young adults are thinking about.
Initially, I would get just a question or two a week, mostly meaningless ones like “Is insurance required in society?” Over the past six months, though, the frequency and quality of questions has increased manifold. There are days when I get over 10 queries, very specific and informed. I would not have expected young adults to ask about insurance but here you are. Hundreds of them querying insurance instead of Adam Levine or Superwoman. The 1,000-plus questions I’ve read fall broadly into five areas.
Which is the best health insurance for my parents? This is the most asked. It’s remarkable because, in my 20s, I was blissfully unaware about insurance, let alone being sophisticated enough to think about its relevance to my parents.
There are many insurances for parents, people in their 50s and 60s. By law, all health insurance must allow purchase up to 65 years. A few insurers go beyond that minimum threshold. The difficulty in buying health insurance, though, is that at older ages many people suffer from chronic ailments like hypertension or high cholesterol. Insurers do not want to issue insurance to them, which is why many proposals are rejected. That’s why substantial product and insurer research is required to buy health insurance for parents.
The Mint Medical Ratings can guide and help identify “A” rated products (http://www.livemint.com/mintmediratings). For a sum assured of Rs.10 lakh, and where the eldest parent is 65 years old, “A” rated products are offered by ICICI Lombard, Liberty Videocon, Iffco-Tokio, Religare Health and Apollo Munich Health. If you find regular mediclaim expensive, an excellent option is to buy top-up insurance. This pays medical costs above a certain minimum threshold. These top-ups are readily available, easier to issue and relatively economical. Those in their early 60s can buy a top-up plan of Rs.15 lakh sum assured with a Rs.5-lakh deductible for Rs.20,000.
Which term insurance should I buy? Most young adults who ask this don’t appear to have dependants yet but are planning for a future with spouse and children. Many young adults get so caught up in the analyses of term insurance that they end up buying nothing. That’s unfortunate because it is better to buy any term insurance than not buy none. Over the years, term insurance has become a commodity. Contracts and exclusions are standardised; most insurers reinsure their term plans with the same small set of high quality reinsurers; and by law, claims cannot be rejected after three years, which reduces the relevance of insurer selection. See that the insurer does full medical underwriting, and you should disclose your health information accurately. This will prevent claim rejection in the first three years of the term insurance.
Buy a sum assured that is 10 times your current annual income. If you can’t afford that much, buy less but get going. For a 25-year-old, Rs.1 crore of term insurance cover costs about Rs.8,000 a year. All the analysis you do will not save you more than Rs.1,000 a year.
Which mobile insurance plan is genuine? Young adults are distraught if things go wrong with their smartphone. Mobile insurance is a product that insurers offer but have not marketed aggressively as claim ratios have been high. The insurance available covers losses due to fire, theft, accidental and liquid damage. There are several issues with mobile insurance—claims are often paid on the depreciated value of the phone, deductibles can be high, the insurance has many exclusions (about 30 in one insurance I reviewed), and there are restrictions on where phones can be repaired. Put together, this means that the claims process is likely to be long and contentious.
Private enterprises have stepped in to fill the vacuum with their own warranty and buyback products. I would suggest that if you have an expensive phone and the manufacturer offers a warranty plan, buy that. Or better still, just be more careful.
What is the best overseas travel insurance to buy? Young adults travel abroad, far earlier and more frequently than we did. The first time I went abroad, alone, was at 30. That probably explains all the questions on overseas travel insurance.
The two important considerations in overseas travel insurance are the international hospital network of the insurer and the extent to which costs due to pre-existing diseases are covered. Insurers with established overseas partners have wide, and tried and tested networks that work. In most travel insurances, main cause for claim rejection is classification of the claim as “due to pre-existing conditions”. A few new products, particularly by stand-alone health insurers, cover emergency hospitalisation up to a limit, even if caused by pre-existing diseases. The most efficient way to buy overseas travel insurance is online where the process is completed in minutes.
What are the best jobs in insurance? This is a natural question from a young adult. I’m glad people ask me that, because we do need lots of good talent in the industry. People who can shake things up, who can be conscience keepers and work single-mindedly with buyers in mind. You earn well too.
If you are looking to build a career in insurance, then I would say that the underwriting and actuarial jobs get you into the heart and soul of this business. The heart because new products originate from these functions, and soul because these functions deal with the main reason why insurance exists, which is to pay claims.