Health insurance is an important security coverage for individuals and families to reduce their financial burden towards health care expenses. However, most health insurance plans come with terms and conditions mentioned in the policy document. ‘Waiting period’ is a term that many insurance companies include in their health plans. Implication: Such insurance policies do not come into effect immediately after purchase. It also means that the policyholder can make a claim only after the waiting period is over. Insurers include various waiting periods in their plans, starting from an initial waiting period of 30 days for all non-accident claims and ranging between one and four years for specific illnesses and surgeries.
Policies that have a waiting period of 30 days will not cover any illness during this period, unless it is hospitalization due to an accident. Policies with a two-year waiting period will not cover hospitalization for the first two years and surgeries for kidney stones, hernia, cataract, hysterectomy and joint replacement. Currently 14 of the top 15 health plans are accredited Peppermint Of course Insurance Ratings has a waiting period of 30 days for any claim other than accident. This means hospitalization due to fever, malaria, dengue etc. is not covered even in the first 30 days. In these 14 companies, there is also a waiting period of two years for diseases like cataract, hernia, hysterectomy etc.
Zero-waiting period is a feature that enables customers to get full coverage as soon as they buy a health insurance plan. Apart from hospitalization due to accidents, the zero-waiting period policy will provide coverage for all illnesses with immediate effect. While customers benefit from such a policy, many insurers avoid this facility. The primary reason is the lack of trust due to asymmetry of information between buyers and sellers of insurance products. Many customers buy health insurance only when they are diagnosed with a disease. However, the business model of insurance companies depends on spreading measurable risk across a large pool of customers – they also need a good mix of healthy customers. Currently, insurers maintain this balance by building such waiting periods into their policies. In a zero waiting period regime, this delicate balance is broken because many clients who are diagnosed with a disease will want to buy insurance just before treatment. This would lead to a significant increase in the proportion of unhealthy customers in the portfolio, resulting in higher risk exposure for insurers and more expensive insurance policies.
In the lending industry, this trust issue has been addressed by the launch of industry-wide trust-markers such as the CIBIL score which indicates the creditworthiness of a customer based on past transactions. CIBIL Score has not only democratized data among stakeholders but also ensured that it drives the right customer behavior and also allows companies to innovate. Lenders are now able to weed out bad customers (a small minority) and provide better customer experience to good customers.
How can insurance companies strike the right balance between risk exposure and customer benefit? For insurance companies to offer coverage from day zero, they must have a robust system in place to assess the health of their customers. Mandating medical tests for all eligible customers can help insurers accurately gauge the health of an individual and thus offer rates accordingly. Digitization of health records as part of the Ayushman Bharat Digital Mission (ABDM) charter and ease of customer data flow across various ecosystem players will help insurance companies to better underwrite and offer better rates to customers based on their health Can get
Finally, the regulatory authority should allow insurers to deny claims from customers who lie about their health conditions. This would prompt the customers to be honest about their health status. By combining all these data points, we can have an industry-wide health index score, which treats the customer right and allows insurers to come up with better customer propositions. Technology, with the right expertise and partnerships, can sow the initial seeds for insurance companies to offer zero-waiting period in their health plans. After that we just need some insurance companies to stick their necks out and do right for the customers.
Rupinderjit Singh is the Vice President of Retail Health at ACKO.
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