The Story Behind Introduction Of New-Age Rs 1 crore Health Insurance Plans

Health insurance is one of the most crucial elements when it comes to financial planning for yourself and your family. A comprehensive health insurance plan offers extensive coverage and acts as a financial pillow in case of medical emergencies.

The rising costs of hospitalization for ailments year on year (medical inflation) and proliferation of specialized medical care especially for critical conditions have made large coverages (high sum insured) necessary. This however triggers an important question on how large is large enough and at the same point affordable, both today and tomorrow? Our quest and research to answer this question led us to co-creating an affordable 1 Cr health insurance plan in the market.

To set the record straight, high-sum insured covers are not new to the market and have existed for years. However, these plans of Rs 1 crore offered sufficient coverage but at a premium that wasn’t affordable to the middle class. We helped to build and introduce the new-age Rs 1 crore health insurance plans which are much more affordable, almost one-third of what was being charged earlier.

In line with the core ethics of Policybazaar- ‘Customer first’, we worked with insurers & reinsurers to build the right solutions tailored to the individual needs of the customers. The products that we build for the consumer don't have a one size fits all approach. We are constantly innovating the way an insurance product is constructed and that is the area where we partner with companies to offer all the information they need to build these products. The new age Rs 1 crore health insurance plan is one such example.

Data mining to give relevant insights

In order to construct a new sustainable proposition, we started with the data on the base product of health insurance – all purchases and usage – of all customers across our platform observed the risk outcome of our customers’ data in partnership with insurers on health insurance. We realized that in a product that’s constructed to pay for actual healthcare claims, the chance of paying a large claim is very minimal. While there is a real danger about rising healthcare costs and new-age techniques and we are worried about us being the one at the receiving end, they are not very frequent occurrences statistically across the population, at least the digital population.

This meant that it was possible to construct a theoretical higher cover for a very little incremental premium from the base level of say Rs 5 Lakhs which was the mainstay for our customer on our platform. The market that was selling these higher covers had inherently bundled too many frills (plus had over accounted for the chances of such claims) to end up pricing them as high as they were. “Our customers needed a car that was connected and intelligent. They really did not care about the brand premium or that the car had frills including hand-made leather seats or inclined cushions. They just wanted a functioning intelligent car that would be superior to their current driving experience. We felt that it was possible to just bring intelligence down to the entry-level and not the other things that make up the cost” said Vaidyanathan Ramani, Head, Product, and Innovations, Policybazaar.

“There was an assumption of higher claim outcomes than what was actually available across our customer segments over a 7 year period. This may have been due to limited proliferation of such high covers (and thus expectation of high adverse selection). Whatever may be the reason, there was a scope to make it affordable if one could control the adverse selection. We worked with our insurance partners to re-draw the cost of claims and thus the pricing with this new assumption and control,” added Ramani.

Working with insurance partners for personalization of products

So, that is how Policybazaar worked with its insurance partners and brought a much more affordable and at the same time, adequate cover for the customer in the market. “We continuously mine the data of customers and their risk experiences to redraw the risk curve in the market in partnership with our insurers,” said Ramani.

Therefore, the products on Policybazaar’s platform are highly personalized and unique.

We were able to thus drive the market for a win-win solution and transform it at the same time. This is evident from the fact that high sum insured covers received a lot of traction and towards the end of 2019, the penetration of high sum insured policies (1 crore cover) was at 2% which has now grown to 35%. Demand for plans with higher sum insured (more than Rs 25 lakh) also witnessed a jump of 40% over FY 20, as per a survey released by Policybazaar on World Health Day.

The age group of 31-40 years has the highest share in buying the high sum insured policies (Rs 1 crore) i.e. 40% followed by 25% for 18-25 years and 16% for 26-30 years. The survey also showed that there was a 150% jump in requests from policyholders to port existing health insurance plans to a higher sum insured (more than Rs 25 lakhs) from lower covers (Rs 5-10 lakhs).

Today, a Rs 1 crore sum insured cover from Aditya Birla is available at a nominal cost of just Rs 797 per month for a 30-year-old person living in Delhi. If you compare the cost of a Rs 1 crore health insurance plan with a Rs 10 lacs cover, there will only be a small difference of around Rs 100-200 per month which is easily affordable.

There are also monthly, bi-monthly, and quarterly payment options for health insurance plans which were introduced by the Insurance Regulatory and Development Authority of India (IRDAI) in April 2020 as a temporary relief for 12 months due to Covid-19. From October, insurers had revamped their products too with installment options built into the policies.

Do you need Rs 1 crore health insurance?

The increase in unhealthy and sedentary lifestyles along with pollution in cities, has made us more prone to health disorders. One in 10 Indians will develop cancer during their lifetime and one in 15 will die from the disease, according to a report released by the World Health Organization (WHO) in February 2020. The cost of cancer treatment varies between Rs 5 lakhs - 50 lakhs depending on the complexity. Minor Heart procedures like angioplasty can cost upto Rs 5 lakhs, and major procedures can cost Rs 15-30 lakhs. The average cost for Covid-19 treatment is around Rs 4-5 lacs and those with co-morbidities is around Rs 15-20 lacs.

Moreover, there can be a situation when more than one member of your family gets hospitalized in the same year. In this case, having a low-sum insured cover may not help and you will have to shell out money from your own pocket. One must also buy a health cover keeping in mind, not just current medical inflation but also the rise in medical costs in the future. Also, the current process of purchase of health insurance mandates one to be underwritten every time one tries to expand the coverage (by a new plan or by seeking increment on the current plan). This is particularly a problem as if one gets afflicted by an ailment, then they will not be able to raise their medical cover although they will now need it. A high sum insured cover thus provides a big optional value of assured large coverage in older age when you need it, even if you make a claim or have been affected.