GAIN MORE FROM IN­SUR­ANCE MAKEOVER

En­hanced and flex­i­ble plans in life and health seg­ments meet the var­ied needs of dig­i­tal-age con­sumers.

Business Today - - CONTENTS - By Renu Ya­dav Il­lus­tra­tions by Raj Verma

En­hanced and flex­i­ble plans in life and health seg­ments meet the var­ied needs of dig­i­tal-age con­sumers.

Are you in­sur­ance savvy? Many peo­ple who claim to be fi­nan­cially smart never fail to re­view and re­align their bud­gets and in­vest­ment port­fo­lios. But they would rarely mon­i­tor and an­a­lyse their op­tions to get the best out of a fast-evolv­ing, con­sumer-cen­tric and tech­nol­ogy-driven in­sur­ance ecosys­tem. In In­dia, the in­dus­try was off to a fly­ing start in the first decade of the new mil­len­nium. But due to a high-cost struc­ture and the se­vere down­turn dur­ing 2007-2008, prospec­tive con­sumers were re­luc­tant to buy in­sur­ance prod­ucts by the end of the decade. It prompted the In­sur­ance Reg­u­la­tory and De­vel­op­ment Author­ity of In­dia (IRDAI) to come out with sev­eral path-breaking re­forms which shred­ded the ear­lier cost struc­ture and made the seg­ment more cus­tomer-friendly. As a re­sult, in­sur­ers have rein­vented their prod­ucts and min­imised costs, es­pe­cially in rapidly grow­ing cat­e­gories such as term plans and unit-linked in­sur­ance plans (ULIPs). The health in­sur­ance seg­ment has also kept pace with the chang­ing times, pro­vid­ing bet­ter of­fers and in­clud­ing med­i­cal con­di­tions which were not cov­ered be­fore.

Apart from the reg­u­la­tory push and com­pet­i­tive pres­sure, tech­nol­ogy, too, has played a sig­nif­i­cant role in op­er­a­tional im­prove­ment and cost-cut­ting. Thanks to ris­ing In­ter­net pen­e­tra­tion, smart­phone in­va­sion and dis­rup­tive tech­nolo­gies, com­pa­nies have au­to­mated and syn­chro­nised their pro­cesses, and es­tab­lished di­rect con­tacts with cus­tomers, en­sur­ing af­ford­abil­ity and easy ac­cess. Mo­bile apps from in­sur­ers are also play­ing a sig­nif­i­cant role in rais­ing the bar of cus­tomer ser­vice. Ac­cord­ing to Kalpesh Me­hta, Part­ner at Deloitte In­dia, “The in­sur­ance in­dus­try, both glob­ally and in In­dia, has come a long way with the in­tro­duc­tion of new tech­nolo­gies across the value chain. Some of the big­gest evo­lu­tions in this space have been trig­gered by in­no­va­tions such as blockchain, In­ter­net of

Things, ar­ti­fi­cial in­tel­li­gence, drones and Big Data anal­y­sis.”

Now that long waits, te­dious pro­ce­dures and cum­ber­some pa­per form-fill­ings are well be­hind dig­i­ta­lage cus­tomers, let us take a look at the in­no­va­tions on the prod­uct side in life and health in­sur­ance space that will help you save money and lev­er­age more ben­e­fits.

The Rise of Term Life Cover

Terms plans have been here for a long time, but they have be­come pop­u­lar since the last decade and seen phe­nom­e­nal growth in the re­cent years. For in­stance, ICICI Pru­den­tial Life In­sur­ance has posted a three-year CAGR of 80.4 per cent in the firstyear pre­mium un­der term plans, the com­pany says. Max Life has a sim­i­lar story. Its term plans ac­counted for 2 per cent of the to­tal poli­cies sold in

FY2013/14, which grew to 20 per cent in 2017/18. Sim­ply put, term plans pro­vide life cover for a set pe­riod, say

10-30 years, at a rel­a­tively low cost. How­ever, they have grad­u­ally evolved and cur­rently pro­vide cov­er­age up to

80-85 years. “The re­cent ad­di­tion is whole life term plans which will cover you through­out your life­time. Th­ese term plans are ideal for those look­ing at guar­an­teed pay­outs or those who are keen to leave a legacy for the fam­ily,” says San­tosh Agar­wal, As­so­ciate Di­rec­tor and Clus­ter Head of Life In­sur­ance at Pol­i­cy­bazaar.com. Whole life poli­cies usu­ally have a ma­tu­rity pe­riod of 100 years and of­fer flex­i­ble terms for pre­mium pay­ment. In fact, one can opt for a pre­mium-pay­ing term which will be lower than the pol­icy ten­ure. Re­turn of pre­mium is an­other new fea­ture. If the in­sured per­son sur­vives the pol­icy term, the en­tire pre­mium will be paid back.

Ae­gon Life In­sur­ance was the first com­pany to in­tro­duce on­line term in­sur­ance plans in In­dia. Now, al­most all ma­jor in­sur­ers of­fer them on­line, thus sav­ing on the dis­tri­bu­tion com­mis­sion and bring­ing down the cost. “Ten years ago, a term in­sur­ance plan for `1 crore did cost `20,000-30,000 a year for a non-smok­ing, 30-year-old male. Now, the same quan­tum of cover can be pur­chased for an an­nual pre­mium of

`10,000-12,000,” says Puneet Nanda, Deputy Man­ag­ing Di­rec­tor at ICICI Pru­den­tial Life In­sur­ance.

“In­sur­ers are ex­per­i­ment­ing with newer dig­i­tal tech­nolo­gies and us­ing pre­dic­tive an­a­lyt­ics to lower on­board­ing costs and en­sure quick and fric­tion­less pol­icy pur­chase,” says Ae­gon’s CFO Rajeev Chugh. Cus­tomers have also be­come more tech-savvy and more in­formed which have helped in bring­ing down the cost. “Peo­ple who buy in­sur­ance on­line are dif­fer­ent – they are more health con­scious, gen­er­ally more aware of the risks and have bet­ter ac­cess to healthcare. Th­ese fac­tors translate to lower mor­tal­ity charges for the same life cover,” points out Manik Nan­gia, Di­rect Mar­ket­ing and Chief Dig­i­tal Of­fi­cer, Max Life In­sur­ance.

“PEO­PLE WHO BUY IN­SUR­ANCE ON­LINE ARE MORE HEALTH CON­SCIOUS, MORE AWARE OF THE RISKS AND HAVE BET­TER AC­CESS TO HEALTHCARE. TH­ESE FAC­TORS TRANSLATE TO LOWER MOR­TAL­ITY CHARGES FOR THE SAME LIFE COVER” Manik Nan­gia, Di­rect Mar­ket­ing & Chief Dig­i­tal Of­fi­cer, Max Life In­sur­ance

of them could be pur­chased ear­lier as riders, but they are now avail­able as in­built fea­tures in on­line prod­ucts. For ex­am­ple, ICICI Pru­den­tial iPro­tect Smart pays a sum as­sured in case of ter­mi­nal ill­nesses, in­clud­ing AIDS. HDFC Life of­fers pre­mium waiver un­der its Click­2Pro­tect 3D Plus plan in case of to­tal and per­ma­nent dis­abil­ity due to an ac­ci­dent. It also has an in­built cover for ter­mi­nal dis­eases.

Dis­ease-spe­cific plans: Stand­alone in­sur­ance plans are avail­able for lifethreat­en­ing dis­eases where in­sur­ers pay lump sum amounts at early stage of the dis­ease. DHFL Pramer­ica Life In­sur­ance cov­ers both can­cer and heart con­di­tions un­der its Can­cer + Heart Shield Plan and ICICI Pru­den­tial Life has a sim­i­lar of­fer­ing un­der its Heart/Can­cer Pro­tect pol­icy.

Crit­i­cal ill­ness plans have also wit­nessed a broader cov­er­age – from the ear­lier five-six med­i­cal con­di­tions to as many as 40. Once again, in­sur­ers pay lump sum amounts based on the di­ag­noses of crit­i­cal ill­nesses. SBI Life Poorna Su­rak­sha has an in­built crit­i­cal ill­ness fea­ture that cov­ers 36 dis­eases. “Tech­nol­ogy has en­abled up-sell­ing of prod­ucts, es­pe­cially niche, low-ticket plans like can­cer poli­cies,” says San­jeev Pu­jari, Pres­i­dent, Ac­tu­ar­ial and Risk Man­age­ment, SBI Life In­sur­ance. Max life pro­vides a crit­i­cal ill­ness rider, cov­er­ing up to 40 med­i­cal con­di­tions. One can buy crit­i­cal ill­ness poli­cies as stand­alone plans or riders.

Cover against loss of in­come: Get in­come pro­tec­tion if you are un­able to earn due to ac­ci­den­tal dis­abil­ity. HDFC Life pro­vides an in­come ben­e­fit in its ac­ci­den­tal dis­abil­ity rider so that the in­sured will get one per cent of the sum as­sured as a monthly in­come for 10 years in the event of to­tal and per­ma­nent dis­abil­ity. Plus, com­pa­nies of­fer bun­dled prod­ucts to pro­vide com­pre­hen­sive pro­tec­tion un­der one pol­icy. HDFC Click 2 Pro­tect Health is one such in­no­va­tive prod­uct that of­fers both health and life in­sur­ance.

MWPA ben­e­fits and more: One can buy life in­sur­ance un­der Sec­tion 6 of the Mar­ried Women’s Prop­erty Act so that his spouse and chil­dren will have the ab­so­lute right to death ben­e­fits of the pol­icy and not even his cred­i­tors could su­per­sede the nom­i­nees. ICICI Pru­den­tial Life is of­fer­ing this pol­icy on its web­site. Some life in­sur­ers are also giv­ing the op­tion to in­crease the sum as­sured un­der term plans. Among them are Max Life’s and DHFL Pramer­ica Life’s on­line term plans that come with an op­tional fea­ture for en­hanc­ing cover, keep­ing in mind life’s sig­nif­i­cant events such as mar­riage, the birth of a baby or buy­ing a home. It en­ables to keep up with the in­creased li­a­bil­i­ties with­out pur­chas­ing an­other plan. Again, pre­mium pay­ing ten­ure can be lower than the term cover, and you get flex­i­ble pay­out op­tions, from lump sum to re­cur­ring to step-up re­cur­ring pay­ment.

ULIPs in a New Avatar

ULIPs, a com­bi­na­tion of life in­sur­ance and in­vest­ment com­po­nents (in­vest­ments are made just like mu­tual funds do it), have un­der­gone a trans­for­ma­tion. To start with, in­sur­ers have slashed in­ter­me­di­ary costs and com­mis­sions by of­fer­ing th­ese schemes on­line. Pol­icy ad­min­is­tra­tion charges were brought down, and now some com­pa­nies have done away with pre­mium al­lo­ca­tion charges. “On­line ULIPs are low-cost and zero-com­mis­sion prod­ucts where pre­mium al­lo­ca­tion or pol­icy ad­min­is­tra­tion charges are typ­i­cally zero. Fund man­age­ment charges are capped at 1.35 per cent by the IRDAI and range be­tween 1-1.35 per cent,” ex­plains San­tosh Agar­wal, As­so­ciate Di­rec­tor and Clus­ter Head of Life In­sur­ance at Pol­i­cy­bazaar.com. HDFC Life was the first com­pany to in­tro­duce zero-com­mis­sion ULIP called Click­2In­vest in 2015, she adds.

The reg­u­la­tor has capped ex­penses, thus max­imis­ing in­vestors’ gains. “A ULIP span­ning more than 10 years comes with a reg­u­la­tory guar­an­tee that the max­i­mum re­duc­tion in yield will not ex­ceed 2.25 per cent. It means if a fund earns a gross yield of 25 per cent, the max­i­mum re­duc­tion which is legally al­lowed on ac­count of charges is 2.25 per cent. Hence, a net yield of 22.5 per cent is as­sured,” says An­shu­man Verma, Chief Mar­ket­ing and Dig­i­tal Of­fi­cer at DHFL Pramer­ica Life In­sur­ance.

ULIPs pro­vide life cover as well for which they levy mor­tal­ity charges. “Our new prod­uct called Ba­jaj Al­lianz Life Goal As­sure does not have al­lo­ca­tion charges and the mor­tal­ity charges de­ducted through­out the pol­icy term is re­turned to in­vestors on pol­icy ma­tu­rity,” says Sais­rini­vas Dhuli­pala,

Ap­pointed Ac­tu­ary at Ba­jaj Al­lianz Life In­sur­ance. Edel­weiss Tokio Life has launched a ULIP Wealth Plus plan that pro­vides ad­di­tional al­lo­ca­tions un­der which it in­vests a fixed per­cent­age of the pre­mium paid by the in­sured, thus rais­ing the fund value.

Tax ben­e­fits: Post the Bud­get 2018 an­nounce­ment about tax­ing longterm cap­i­tal gains (LTCG) from eq­uity and eq­uity MFs, ULIPs hold a big tax ad­van­tage. As of now, an LTCG tax of 10 per cent is levied on cap­i­tal gains of more than `1 lakh from eq­uity, but ma­tu­rity pro­ceeds of ULIPs are taxfree due to a com­pul­sory lock-in of five years. ULIPs also qual­ify for a tax de­duc­tion of up to `1.5 lakh in­vested un­der sec­tion 80C. More­over, un­der ULIPs, one can switch funds with­out any cost and tax in­ci­dence, but un­der MFs, a switch be­tween schemes will be sub­ject to exit loads and tax. Ear­lier, ULIPs were typ­i­cally of­fer­ing seven switches be­tween schemes, but now, some of them of­fer un­lim­ited switches. This can be utilised to re­bal­ance your port­fo­lio as per chang­ing mar­ket con­di­tions.

Per­for­mance: New-age ULIPs are in­cred­i­bly cost-ef­fec­tive and ex­penses are nearly in line with MFs, if not bet­ter (off­line ULIPs may have a higher cost). But they are yet to catch up with MFs in terms of per­for­mance. Ac­cord­ing to data pro­vided by Pol­i­cy­bazaar. com, the best-per­form­ing fund un­der ULIPs in the high-risk cat­e­gory (Ba­jaj Al­lianz’s Ac­cel­er­a­tor Mid-Cap Fund II) has de­liv­ered re­turns of 28.51 per cent over the past five years (ended on Septem­ber 10, 2018). On the other hand, Ca­nara Robeco Emerg­ing Eq­ui­ties Fund-Reg­u­lar Plan (the best-per­form­ing eq­uity MF af­ter ex­clud­ing small cap and the­matic funds) has posted re­turns of 33.58 per cent as per Value Re­search. Also, the av­er­age five-year re­turns from funds un­der high-risk cat­e­gory ULIPs is 17 per cent while the MFs post 19 per cent re­turns. There is an­other catch. Un­like ULIP funds, MF re­turns come af­ter the de­duc­tion of to­tal ex­penses, in­clud­ing the fund’s man­age­ment fee and oper­at­ing ex­penses. If we con­sider MF re­turns with­out ex­penses for the sake of par­ity, th­ese will be around 2-3 per cent higher than ULIPs. While con­sid­er­ing MFs, we have also ex­cluded di­rect plans that do not charge dis­trib­u­tor com­mis­sion and hence, are cheaper.

How­ever, there are a few ben­e­fits that are unique to ULIPs. In child plans un­der ULIPs, many in­sur­ers of­fer pre­mium waiver in case of un­timely death of the in­sured, the sum as­sured will be paid to the ben­e­fi­ciary and the in­surer will pay all fu­ture pre­mi­ums. All th­ese pro­vide an ex­tra layer of pro­tec­tion.

“ULIPs have been mis­un­der­stood for a long time, but the per­cep­tion and aware­ness about the prod­uct have im­proved over the past year ow­ing to th­ese new-gen­er­a­tion prod­ucts,” says Anup Seth, Chief Re­tail Of­fi­cer at Edel­weiss Tokio Life In­sur­ance when asked about its po­ten­tial as a con­ve­nient growth-cum-se­cu­rity tool.

Faster, Broader Health Plans Health in­sur­ance is most cru­cial as

the fu­ture of af­ford­able healthcare is still un­cer­tain. With­out a health cover, you will most cer­tainly have to foot a huge med­i­cal bill, be it an ac­ci­dent, a chronic dis­ease or a crit­i­cal ill­ness. In­no­va­tive prod­ucts are also com­ing up in this space to cater quickly to savvy cus­tomers. “Max Bupa’s AnyTimeHealth is a tech­nol­ogy-based so­lu­tion that en­ables a cus­tomer to run in­stant health as­sess­ment and pur­chase a health cover in flat 180 sec­onds,” says Ashish Mehro­tra, MD and CEO at Max Bupa Health In­sur­ance. “The ATH ma­chine runs on five sim­ple steps – regis­tra­tion via e-mail ID and phone num­ber, a non-in­tru­sive health as­sess­ment, an au­to­mated pol­icy rec­om­men­da­tion based on the de­tails en­tered and test out­puts, in­stant pay­ment and in­stant pol­icy is­suance.”

Then there is tele-un­der­writ­ing where an as­sess­ment is made based on the risk-re­lated in­for­ma­tion gath­ered over a call. “The tele MER (med­i­cal ex­am­i­na­tion re­quire­ment) ini­tia­tive has re­duced turn­around time to just one day, of­fer­ing an easy and quick buy­ing ex­pe­ri­ence to our cus­tomers. Di­rect en­gage­ment with end cus­tomers gives the un­der­writ­ers a bet­ter un­der­stand­ing of their health and helps in de­ci­sion­mak­ing,” says Sasiku­mar Adi­damu, Chief Tech­ni­cal Of­fi­cer at Ba­jaj Al­lianz Gen­eral In­sur­ance.

Broader cov­er­age: With cus­tomers de­mand­ing a more ex­ten­sive cov­er­age, health in­sur­ers are in­clud­ing more med­i­cal con­di­tions to their list. “We have in­cluded up to 33 crit­i­cal ill­nesses, an up­grade from our orig­i­nal list of 18. Some of th­ese are car­diomy­opa­thy, ma­jor head trauma and po­liomyeli­tis,” de­tails Sanjay Datta, Chief of Un­der­writ­ing, Claims and Rein­sur­ance, at ICICI Lom­bard Gen­eral In­sur­ance. Ac­cord­ing to Mehro­tra, Max Bupa Health As­sur­ance pro­vides crit­i­cal ill­ness cover for up to 20 med­i­cal con­di­tions such as can­cer, by­pass surgery, first heart at­tack, kid­ney fail­ure and ma­jor or­gan trans­plant. Alzheimer’s, Parkin­son’s and an­gio­plasty are some of the health dis­or­ders added to the ex­ist­ing list of crit­i­cal ill­ness cov­ers, says Sasiku­mar Adi­damu, Chief Tech­ni­cal Of­fi­cer at Ba­jaj Al­lianz Gen­eral In­sur­ance.

Reg­u­la­tory push is fur­ther help­ing con­sumers. In 2016, IRDAI had pre­pared a list of 199 non-payable items and in­sur­ers were given the flex­i­bil­ity to in­clude or ex­clude them. But re­cently, the in­sur­ance reg­u­la­tor has re­moved cer­tain med­i­cal pro­ce­dures and ail­ments (den­tal prob­lems, in­fer­til­ity, obe­sity and HIV, to name a few) from that list.

“The reg­u­la­tor has taken the ini­tia­tive to en­hance the spec­trum of health in­sur­ance plans. It has also is­sued cir­cu­lars on dis­eases like ge­netic dis­or­der and men­tal ill­nesses although both are gen­er­ally per­ceived to be part of ex­clu­sions. Get­ting them in­cluded has en­abled in­sur­ance com­pa­nies to tap into a mar­ket that has great po­ten­tial,” says Pra­sun Sik­dar, MD and CEO at Cigna TTK Health In­sur­ance.

Ma­ter­nity ex­penses cover: It is mostly avail­able as an add-on rider and cov­ers ma­ter­nity ex­penses af­ter a wait­ing pe­riod of three-four years. But now the wait­ing pe­riod has been re­duced to one year. “Our re­cently launched su­per top-up health plan called Ex­tra Care Plus cov­ers ma­ter­nity ex­penses just af­ter 12 months. Ad­di­tion­ally, we have in­tro­duced a credit-linked health plan that takes care of ex­ist­ing loans if the in­sured is di­ag­nosed with crit­i­cal ill­nesses or has an ac­ci­dent,” says Adi­damu of Ba­jaj.

OPD charges: Ear­lier, health in­sur­ance poli­cies cov­ered only hos­pi­tal­i­sa­tion ex­penses, but a hand­ful of in­sur­ers, in­clud­ing Apollo Mu­nich, Cigna TTK, ICICI Lom­bard, Ba­jaj Al­lianz and Max Bupa, now cover OPD charges, es­pe­cially con­sul­ta­tion fees and pre­scrip­tion costs. Some of the poli­cies also in­clude the cost of den­tal treat­ment and eye gears.

Plans for se­nior ci­ti­zens: Th­ese are rel­a­tively new of­fer­ings for peo­ple gen­er­ally above 60 years. Un­der th­ese schemes, in­sur­ers mostly pro­vide cov­er­age up to 80 years but the wait­ing pe­riod can range be­tween one and four years. A few plans such as Apollo Mu­nich Op­tima Se­nior and TATA AIG MediSe­nior are life­long re­new­able.

Health wal­lets: Apollo Mu­nich has come out with a health wal­let plan un­der which the un­claimed amount gets car­ried for­ward and earns a six per cent bonus. The ac­cu­mu­lated kitty can be used to pay 50 per cent of the re­newal pre­mi­ums post five re­newals.

“TEN YEARS AGO, A TERM IN­SUR­ANCE PLAN FOR `1 CRORE COST `20,00030,000 A YEAR FOR A NON-SMOK­ING,

30-YEAR-OLD MALE. NOW, THE SAME QUAN­TUM OF COVER CAN BE PUR­CHASED FOR AN AN­NUAL PRE­MIUM OF `10,000-12,000” Puneet Nanda, Deputy Man­ag­ing Di­rec­tor, ICICI Pru­den­tial Life In­sur­ance

In­built fea­tures: Be­sides life cover, term plans are of­fer­ing a plethora of in­no­va­tive fea­tures to en­sure a wider choice and en­hanced cov­er­age. Some

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