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Friday, November 12, 2010

Securing our Elders

A recently-held special seminar for senior citizens at the Moneylife Foundation discussed the various problems faced by the elderly in matters relating to finance, healthcare and insurance, and the solutions for the same.

Senior citizens slowly find themselves left in the wilderness with regard to various matters, and especially those relating to finance, health and insurance. The bad news is that there are no easy solutions and the scenario isn't encouraging. Take the case of insurance. According to statistics available, insurance companies have made lower payouts on claims by senior citizens than they have towards group policies of large corporate.

This was discussed at a special seminar on healthcare insurance for senior citizens at the Moneylife Foundation on 25 September 2010. Rohan Dukle, director, Magus Corporate Advisors Pvt Ltd, an insurance claims consultancy firm, said during his presentation on the subject that there were no great options for senior citizens, but there could be some solutions through aggregation. He suggested that a holistic solution could help improve the situation for seniors who have almost no cover at all.

The programme was attended by senior citizens, some knowledgeable persons representing senior citizen groups, insurance and hospital professionals and members of the Moneylife Foundation.

Mr Dukle explained that in working towards an aggregated solution, it was necessary to focus on ways to enhance protection for each person as individuals have different needs, levels of protection and finance. "There can never be a single solution that fits everybody who has crossed 60," Mr Dukle said. The Magus director proposed the constitution of an 'aggregated' group, and offered the services of his team to analyse individual needs and structure a solution.

The argument for setting up an aggregated group is that it would have increased negotiation power with insurance companies. The services offered did not imply dealing with a particular insurance company or loading a premium for senior citizens based on the claims ratio of the group. The 'aggregation' would consider each policyholder independently, while using the power of the group to negotiate with multiple insurance companies. Mr Dukle's team that would provide services to the aggregated group includes insurance professionals, chartered accountants, doctors, lawyers and claims experts.

Sanjay Datta, head of customer services for health and motor insurance at ICICI Lombard, echoed the remarks by Mr Dukle on the limited mediclaim options for senior citizens. He also said that the healthcare industry was going through a lot of changes. "The escalating costs of medical costs, coupled with de-tariffing and new competition, has put pressure on the industry. The cashless spat between PSU insurers and hospitals reflected the high claims ratio," he said. "ICICI Lombard has been able to continue the cashless facility across 4000-plus quality hospitals to date, but we do have the concept of Preferred Provider Network (PPN) where we drive the business on properly negotiated rates. We have moved to in-house claims processing that is working out well. We have had no increase in premium, except due to change in service tax and cess."

One of the problems senior citizens face is the difficulty in increasing the sum assured. For example, if one were to increase the sum assured from Rs1 lakh to Rs3 lakh, the pre-existing conditions would not apply on the increased amount of Rs2 lakh for the rest of the stipulated period. More importantly, after a certain age limit (like in the case of senior citizens) insurance companies could refuse to increase the sum assured, Mr Dukle pointed out. Therefore, he underlined the need to plan insurance coverage-especially for the silver years-in the 30s, or at least in the 40s. (The American Association of Retired Persons begins enrolment of members from the age of 50. The association provides a slew of services and educates its members on various matters of interest.)

Another aspect that was discussed was on how insurers linked pre-existing ailments and current illnesses to reject claims. Also, unlike vehicle and property insurance, healthcare insurance payments/ denials are hotly contested by both sides. Therefore, it is necessary to ensure that the documents submitted to the insurer have no errors on the doctor's certification for the date when the ailment was diagnosed. It has huge ramifications on the benefit payment.

Legal redressal for the policyholder is another important area. Mr Dukle explained that in the insurance sector recourse was slow and justice often delayed or denied. Among the options available to the policyholder if claims are denied or slashed is approaching the grievance cell of the insurance company, or the grievance cell of the Insurance Regulatory Development Authority (IRDA), the Insurance Ombudsman, or consumer court and finally the civil court. All are expensive and time-consuming, with no certainty of a positive result.

Mr Dukle said customer ignorance was also a big problem as there is very low awareness about the basic issues that are key to picking proper insurance cover.

"With total de-tariffing of the non-life industry post-2006, resulting in major price wars in hitherto profitable segments such as fire, engineering and so on, there is increased pressure on the bottom lines of insurers," Mr Dukle said. "This coupled with lower ceding commissions has resulted in tremendous pressure on the insurers, forcing them to reconsider pricing." With the constant entry of new players in the non-life segment, this pressure is not expected to reduce immediately. As such, therefore, insurers are becoming more stringent in passing of claims. This is even more evident in the case of Mediclaim which is repeatedly seeing high incurred claim ratios.

The Margus director said, traditionally, in a tariffed regime, insurers followed the policy of "pay if you can, reject if you must". In the current scenario insurers are rejecting claims at the slightest opportunity, taking advantage of weak redressal mechanisms. This is why he often recommended insurers who charge a higher premium with an assurance of hassle-free claim settlement, for clients who are not price sensitive and want quick settlement for genuine claims.

Medical care is one of the three main causes of impoverishment in the country. Treatment costs of major ailments like cancer, heart attack, stroke, renal failure are galloping. It is estimated that senior citizens will make up 10% of the population by 2015, with old age dependency increasing from 8.1 in 2000 to 22.6 in 2050.

In this scenario, Moneylife Foundation intends to work with service providers such as Mr Dukle to find ways to obtain holistic solutions for senior citizens through the power of aggregation. Those interested to know about our initiatives can write to mail@mlfoundation.in and we will be in touch with you when a product or service is worked out. We also welcome ideas and suggestions to take this initiative forward.

Source: http://www.moneylife.in/article/78/9652.html

Securing our Elders - Moneylife: Personal Finance Magazine

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