Why does buying health insurance in India suck?
In a story I published around a year ago I talked about how buying health insurance and life insurance is the first step to financial security. It practically allows for predictability in terms of the rest of your financial planning and you know you have a cushion if anything goes wrong.
So while practicing what I preach, I bought a “term plan” (essentially plain vanilla life insurance) for myself to ensure my family doesn’t have to worry about finances especially when they have a bigger reason to be worried.
Term plans are relatively more straightforward but the insurance companies do make it more confusing by mixing them with investment options (Endowment Plans, ULIPs, etc.) which neither give you the best benefit of insurance nor of investment.
Apart from this, you will also hear about options where you can pay a higher premium for a lesser duration for the same cover or cases where for a higher premium you can get back all the amount you invested back if you don’t claim your life insurance, hence you practically get the insurance for free (RIP Inflation 🙄)
A simple ROI and lost opportunity analysis will almost always point toward a plain vanilla term plan, the rest is all psychological. Remember that you are buying life insurance wishing you would never have to use it.
But then came another behemoth task for me where I had to buy health insurance policies for my parents and I realized just how irritating, confusing, and often misleading the Indian health insurance market can be. Here are a few reasons why buying health insurance in India suck.
Everything is behind a contact wall
I am not sure what is the obsession with having everything behind an information collection window and the literal barrage of calls that you start receiving as soon as you start researching about the right health insurance for yourself. Also, these callers almost always have more options than the ones listed on different websites. Hence it becomes very difficult to compare different policies objectively.
It is all about the leads
Something that answers the obsession with getting my phone number about all these insurance providers is that at the end of the day this is a sales-led business. Companies wouldn’t mind spending on sales as a lead generates high recurring revenue and it is only very late that someone might realize they bought a bad or an insufficient insurance plan, and what option do you have at that time?
Health insurances are complex
Health insurance is inherently complex and there are two primary reasons for that.
- Domain Complexity: Health itself is complex and a potential ailment, injury, its cause, diagnosis, prognosis, treatment, therapy, care, and most importantly the costs associated with them is not straightforward by any mean.
- Business Complexity: On top of that, Underwriting (the process through which the insurance companies take on the above-mentioned financial risks for a fee) is tricky. These companies need to ensure they make profits while competing with a vast market so that you don’t feel you are paying a lot.
One can only try to understand the most important parts of this complexity. For those few, I would suggest reading this.
The details are in the fine print
This is one major reason why I am writing this article. I got tricked because I didn’t read the fine print well before buying the policy. When you are going through all the complexities mentioned earlier ask yourself questions like the following.
- Coverage: Does your coverage apply to all diseases or is there any disease-wise sub-limit?
- Copayment: Is there no copayment on any hospital or only network hospitals? Is it only until a certain age?
- Riders: Riders are add-ons to your insurance policy. Do check if your policy mentions any rider you do not understand. For e.g. a policy I bought from Care insurance had a “Smart Select” rider added which I had not requested in the name of a 15% discount. I later realized that it enforces a 20% copayment on their non-network hospitals.
- Restoration Benefit: Does your policy offer restoration benefit for the same member? Does it offer restoration benefits for the same disease? Are you even looking for such a benefit?
- Extras: Does your policy cover air ambulance? Do you want free annual checkups? Do you want the insurance to cover expenses on items like doctor PPE kits, masks, bandages, etc. if you are hospitalized? Is your coverage inflation-proof? What all extras do you think are worth it.
So now that we have established that buying health insurance sucks, let’s still agree on the fact from where we started as to how necessary and unavoidable it is. Through my process of trying to buy good insurance (and even failing once) here are my tips for anyone who is planning to buy health insurance for themself or anyone else.
- Know your needs well. Understand the health profile of the insuree and how much you are willing to pay for insurance. You can always start with a lesser coverage/benefits and upgrade the policy once your age and/or income grows.
- Research well. While I know it's painful to get so many calls from the insurers and the aggregators. Compare these policies through platforms like policybazaar, coverfox, insurancedekho, ditto, etc. Ask the people who are calling you to send the policy details via email. In fact, ask them for comparison charts. Also rather than asking what is better in an expensive policy compared to another one. Try to ask what is not so good about the cheaper one. I have generally got more details that way.
- Weigh Future. Whether you buy health insurance or term insurance, you are not buying it for a day, a week, or a month horizon. You are buying it to secure yourself for years to come. So try to think what can potentially happen in those years. While it is not a very positive experience to think about the ailments and potential death that can happen to you (or someone else), it would help you take better calls. For e.g. a 25 Lakh worth of life insurance might be okay for a 28-year-old person like me. But 10 years down the lane it would not be enough to support their parents, wife, and kid(s). Similarly do check out what negative experiences have happened with health insurance policy owners. Youtube is filled with such experiences. Exhibit A
Lastly, a very important thing that saved my money is that every insurance policy offers a free-look period (15–45 days) during which you can decide whether you want to keep your policy or cancel it and receive a full refund against it. Hence read the entire policy document with utmost care once you receive it so that if anything doesn’t seem right you can claim your money back.
Hope this story helps you with your insurance search. Do mention in the comments, your experiences with searching for insurance or claiming it.
