Pros & cons of payment of mediclaim premium in installment

Harjot Singh NarulaComparepolicy.com Insurance Regulatory Development Authority of India (IRDAI), in its latest regulatory move, has permitted the health insurance providers to get their health insurance products approved which will facilitate the partial premium payments by the customers towards their Health Insurance Policy. At present, the customer has to pay the entire annual health insurance premium in one go to reap the policy benefits in case of a health claim.But with the regulator's recent move, the insurance companies are projecting increase in the affordability while buying health insurance policy for a customer. The customers can now buy a health insurance product approved by the regulator for part payment premium option and can opt to pay monthly, quarterly or half yearly along with an existing annual mode of premium payment.Currently, the mode of premium payment to seek health insurance product is annual, which means the entire money for the policy term is to be paid on an annual basis.Necessity for such changeIncrease the health insurance penetration:As per IRDAI Annual Report 2014-15 for the financial year, the general insurance industry has issued around 1.09 crore health insurance policies which included 28.80 crore persons as policyholders. The business data disclose that there is a peripheral increase in the number of individuals covered through both government schemes and group insurance policies, whereas under the individual health insurance business segment, the number of persons covered under witnessed a marginal decline.As per latest data report of the National Sample Survey Office (NSSO), only 18% of the urban people and 14.1% in rural areas are covered under any kind of government schemes or any other health schemes.To increase the health insurance penetration level, insurers have welcomed the regulator's move of allowing the policyholders to pay health premiums in multiple premia paying options such as monthly, quarterly, half yearly and annual.Affordability of health insurance products:Majority of Indians, mostly pay for their health care expenses out of their own pocket. As per statistics, on an average, more than 75 % of all health expenses are out of the pocket.The major reason and requirement of regulator's recent move which now allow the customers to pay health insurance premium in partial payments is to make health insurance products affordable. The cost of health insurance product and paying it as a lump sum for the entire policy year makes it cumbersome for the customers and for the prospects who intend to buy health insurance. Health insurance products, if not taken at an early age may not be affordable to many with limited financial strength.Flexibility to opt for higher health cover:The cost of health insurance restricts the policyholders to opt for a limited health cover as per their premium paying capacity. With skyrocketing medical costs, it is imperative to get a health cover which is sustainable in case of medical claims. Inadequate health cover or sum assured has harsh consequences when the health insurance plan is unable to suffice the total cost of medical expenses resulting in paying the remaining balance out of the policyholder’s pocket. With exasperating medical costs, it is vital to have a health cover which is realistic and adequate to combat the aggravating medical cost and inflation. Regulator’s partial payment of the health insurance premium move will encourage people to opt for a higher and adequate health cover as per their convenient premium paying capacity.Other side of the regulatory moveThough the aim of giving the multiple premia paying frequencies to choose from is good and it might show an optimistic increase in the health insurance penetration levels. The other side of the story will invite the associated terms and conditions of paying the health premiums in other premium paying modes apart from annual.• Paying in installments always result in paying more as the insurer will receive the premiums in parts, the policyholder has to pay 3 % to 5% extra premium if the policyholder decides to pay the health insurance premium in installments. More the number of installments, higher will be the premium. The monthly mode will attract 5% loading, and quarterly mode will have 3% loading on the base premium rates. Such loading will escalate the cost of health insurance further.• Other modes of premium payment apart from annual mode are available with a policy term taken as two years or three years. Partial Payment of premium is currently not available with an annual health insurance policy.• As per IRDAI guidelines, the insurer should recover the annual premium amount first before paying the claim amount to the policyholder, if the policy is on any other premium paying mode apart from annual. Latest products offering part payment of health premiumsPrivate and Public Insurers are optimistic about the current regulation by allowing the policyholder to pay health insurance premiums in parts. Several insurers have moved one step forward and introduced their latest offering of multiple modes of premium payment.Future Generali has lately launched maiden health product by the name of “Health Total” which will have the option to pay premiums in monthly, quarterly and half-yearly instalments for the policyholders. The insurer has also given the flexibility to the existing policyholders as well to avail the benefit of part payment of premium.Many insurers like Reliance General Insurance and Cigna TTK have also shown their interest to offer such flexibility to its customer base soon.The regulator’s move will immensely improve the health insurance affordability and penetration levels among the population. With a variety of inventive products in the pipeline, the customers will find their best fit affordable health plans. Multiple insurers have shown their attentiveness and curiosity in innovating health plans offering partial payment which will impact the health insurance business in near future to benefit the customers.