A Mediclaim policy is the most valuable investment an individual or a family can make, as it protects one’s savings/capital, which would otherwise get eroded by major medical expenses incurred through hospitalisation. It is, therefore, unquestionably incorrect to suggest that anyone is better off without taking a Mediclaim cover.
There is no doubt that all claims rejected would stand scrutiny.
There is also no doubt that the functioning of third party administrators (TPAs) generally leaves much to be desired. They have been granted total authority without the obligation to be accountable for their decisions and insurers plead helplessness when approached by an insured whose claim has been rejected or reduced unjustifiably.
The very functioning of TPAs has several deficiencies. When denying cashless authorisation, they do not distinguish between planned hospitalisation and emergency hospitalisation as in both situations they demand to be advised of final diagnosis and final line of treatment.
In most cases, the TPA’s infrastructure does lag way behind the volume of work, resulting in uncalled-for delays.
That the TPA system suffers from several deficiencies is known to the insurers, the General Insurance Council (GIC) and the Insurance Regulatory and Development Authority (IRDA). Several months back, the IRDA nominated a high level committee to submit its findings on the TPA system. However, to date, the general insuring public has no information as to the findings of this committee.
Almost from the beginning, insurers have applied little underwriting to this class of business. In the mindless competition for corporate business, they have willingly written group Mediclaim for corporates at loss ratios ranging from 200% to 400%, whereas the loss ratio for individual buyers of Mediclaim was consistently at sustainable levels.
Interesting insights would emerge if statistics were to be published relating to the following:
The average rate of premium charged for individual covers and group covers i.e., the total premium as a percentage of total sums insured.
The percentage of rejected claims to total claims submitted under individual/family policies and corporate group policies.
On the value of diagnostic tests, pre-granting of cover in order to determine pre-existing ailments would entail additional costs, but the result could be easily manipulated through resorting to medication pre-tests—like beta-blockers by hypertensive patients and sugar-level reduction medication by diabetics. A better and cost-effective solution would be to obtain medical history details from the family doctor along with the proposal form.
There are other failures which are difficult to guard against. The primary one being higher medical and surgical costs being charged by doctors to patients having Mediclaim cover and unnecessary tests being repeated by hospitals in order to inflate the per-bed/per-day recovery.
Having said that, there is no denying the fact that for insurers as a whole, total claims in a year exceed total premium recovered by 40%. This runs counter to the very principle of insurance which is to recover from many to pay a few, to provide an essential service at a fair cost.
I am of the firm opinion that if Mediclaim covers are underwritten on sound and fair lines and claims settled fairly and expeditiously, the industry could manage this class of business at breakeven or possibly a small margin of profit. With the considerable expertise within the insurance industry and the authorities overseeing the industry, I am confident that this can be achieved provided there is a combined will to tackle the problems firmly but fairly.
Any advice to the effect that it would be better to go self-insured would be akin to throwing the baby out with the bathwater. All that needs to be done is to ensure that the quality of the bathwater is good for the baby’s health. — Fali Poncha
(The author is chairman of International Reinsurance and Insurance Consultancy Services Pvt Ltd, an insurance brokerage firm)