Are life insurers equipped to sell indemnity health plans?

from left) Vibha Padalkar of HDFC Life Insurance, Shreeraj Deshpande of Future Generali India Insurance, Abhishek Bondia of and Aalok Bhanof  Max Life Insurance

Last week, the Insurance Regulatory and Development Authority of India (Irdai) formed a committee to look into the feasibility of allowing life insurers to sell indemnity health plans. The payout from these plans is limited to the expenses incurred up to a predetermined sum insured. Irdai had first allowed them to sell individual and group indemnity plans in 2013 but rolled back the provision in 2016, saying life insurers could offer only health products that had a savings element. Now that Irdai is reconsidering the roll-back, Disha Sanghvi asks experts if life insurers are equipped to offer indemnity health plans yet

Vibha Padalkar, MD and CEO, HDFC Life Insurance

It is an obvious opportunity waiting to be leveraged

Statistics reveal that insurance covers a mere 5% of the overall health expenditure in India. Out-of-pocket spends are around 65% and with a growth rate of 18% year-on-year, the coverage gap is a concern.

Health indemnity individual plans which help decrease the burden have the scope to grow at a faster pace. Such plans are largely sold by individual agents and direct channels, a distribution forte of life insurers. It is, therefore, an obvious opportunity waiting to be leveraged and can help narrow the protection gap.

In the last couple of years, term life has more than doubled, on the back of continuous product innovations and ownership of customer needs. However, we could do a lot more by offering customers innovative solutions such as a combined life and health protection offering. With health indemnity, life insurers will be able to offer a comprehensive solution, while passing on the advantages of underwriting and pre-policy expenses. Combine this with the life-long customer ownership which the life insurer has, and a mutual interest in promoting health and wellness, and you have a win-win.

Shreeraj Deshpande, chief operating officer, Future Generali India Insurance

This will lead to better policies and higher penetration

There are two ways to look at it—from the business and from the people’s (human resources plus agency) points of view.

The move will affect the business of specialist health insurance companies that have been the growth drivers for retail health indemnity policies in India. While this will affect general insurers in the retail segment, they will still control corporate or group policies and have other lines of business to rely on, so their focus will move to specialization in the other lines of business, geographic concentration and outreach in tier II and tier III towns to increase penetration. The factor to consider is that general and special health insurers have built underwriting expertise as well as claims management over a period of time, and it will take some time for life insurers to understand the nuances. Life insurers will have to invest time and capital to upskill resources.

If this goes through, general and special health insurers may see higher than usual attrition in both people and agents. Having said that, increase in the number of manufacturers will result in better products and higher penetration.

Abhishek Bondia, MD and principal officer,

Life insurers are not used to high-utilization health product

The expectations of policyholders and the ecosystem for health insurance services have matured over the years. There is a customer segment who would like a single window for health and life insurance. The ability to offer indemnity-based health insurance will allow life insurers to structure product combinations that service both needs. They will be able to leverage their existing distribution network, including banks and agents.

But policyholders expect a more seamless, tech-enabled claims experience. A few health insurers have made the claims process paperless. Life insurers have limited experience in managing indemnity claims. They will have to leverage third-party service providers with tech capabilities and this may not be a competitive advantage.

Also, health insurance is a high-utilization product as compared to life insurance. So, life insurers will need to significantly invest in operations and client engagement capabilities. General and standalone health insurers have gradually enhanced their wellness proposition and network. Life insurers would have to catch up on that.

Aalok Bhan, director and chief marketing officer, Max Life Insurance

Larger base can aid life insurers but they need to adapt

With a more robust experience of delivering specialized protection and health plans and riders over the last few years, the Indian life insurance sector has been able to address the core need of life and health covers.

Life insurance companies with their efficient and large multi-channel distribution will be able to reach out to a larger section of the Indian population at a lower cost. With the sophisticated underwriting processes that life insurers have developed, policy issuance has become much easier. This could be an added expertise that will also help process health insurance faster and more efficiently. Therefore, this could provide more comprehensive protection to consumers in the future.

With indemnity-based health insurance involving higher operational costs of claim processing, the life insurance industry will, as the next step, need to adapt to the evolving challenges in the landscape.

Life insurers will be able to reach out to their large base of existing customers and will be favourably placed to have conversations around health insurance covers.