Choosing the right health insurance policy is as confusing as it is important. Important because medical expenses are constantly rising, so you need health insurance to be able to meet them. Confusing because you can’t pick up a plan on price alone; there are several factors that you need to consider, such as the features of the policy, price, and the claims settlement record of the insurer. This is hard because you will not find this information in one place or in a user-friendly format. To make your job of evaluating a health insurance plan simpler, we have updated Mint Mediclaim Ratings (MMR) developed by SecureNow Insurance broker Pvt. Ltd. MMR rates health insurance policies on the basis of various parameters that are important for a customer when buying a health insurance policy. The data is taken from the insurer’s website, product brochures and public disclosures. Here is the methodology of MMR.
Plans considered
The ratings have considered basic individual and family floater health plans that primarily cover hospitalization expenses, pre- and post-hospitalization expenses and listed day-care procedures. A family floater considers the entire family as one unit, so if one member makes a claim, the cover reduces by that much for all the members in the policy year. When going for a family floater it’s recommended you go for a high sum insured. Accordingly, we have rated plans for a sum insured of Rs.10 lakh and Rs.20 lakh for a family of four in two age categories: eldest member being 35 years and 45 years of age. For senior citizens who are 65 years of age, we have considered a family of two. For individuals aged 35 years, 45 years and 65 years we have taken a sum insured of Rs.5 lakh. We have also introduced a new category for senior citizens, 70 years of age for a sum insured of Rs.10 lakh, given the high demand for health insurance for them.
The rating drivers
The ratings are based on broadly three parameters: features, price and claims record. Each of these parameters have been nuanced further and assigned a weightage according to their importance and a final score is given. The highest weightage of 30% given to an individual parameter goes to premium rates. As a buyer, the price of a product is critical. Accordingly, premiums in the lowest bucket, top quartile in the ratings, have been given the maximum score. But price can’t be the only filter.
In MMR, though price as an individual parameter gets the maximum weightage, others put together account for 70% of the weightage which suggests you look at premiums only after you have gone through other parameters.
Claims comprise 25% of the weightage. Claims is the litmus test of a health insurance policy and insurers with a high claims settling record should bode well for customers. However, the data on claims is very noisy in its current format. The data does not segregate claims coming from corporate policies, where claims settlement is usually high, and individual claims. So insures with a sizeable group portfolio may boast of high claims settlement, not giving a true picture to the retail customers. It’s important to have segregated data for better analysis but this is not available in the public domain.
The second issue is that claims not settled are further bifurcated into claims repudiated and claims closed. Claim repudiated is self-explanatory but closed claims need to be explained. Closed claims are those unpaid claims which are closed either for want of more documents from the insured or where the policyholder hasn’t pursued the claim further. Given this, the percentage of closed claims should be negligible, but if it’s sizeable there is reason to worry.
MMR does not look at the percentage of repudiated claims alone, but that of claims not settled and that is calculated as claims repudiated plus claims closed divided by claims settled plus claims repudiated plus claims closed. We haven’t factored the outstanding claims as a decision is yet to be taken on them. Insurers with not-settled claims of under 5% get the highest score.
We have also added another layer in claims by factoring in the time taken to pay the claims. While 20% weightage is kept for claims settlement, 5% of the weightage is also kept for its duration.
Features collectively account for 45% of the weightage with the maximum individual weightage of 15% assigned to the pre-existing diseases exclusion. Exclusion on pre-existing disease is one of the main reasons for claim rejection. While most insurers exclude pre-existing ailment for four years, few limit it to two-three years. Policies with a lower waiting period score higher. Features such as waiting period on specified ailments and caps on specified ailments have been assigned a weightage of 5.0% each. Previously their weightage was 7.5% each.
The reason why we have reduced the weightage is because increasingly insurers are improvising on their plans to reduce the waiting period and caps on specified illnesses. Plans with no caps get full marks.
We have also reduced the weightage on co-payment from 7.5% to 5.0% because co-payment in the case of policies for a senior citizen is almost a permanent feature. For younger policyholders, co-payment usually features in policies which layer geographies into metros and lower-tier cities. In such policies, if a policyholder opts for a cover in lower-tier cities, she will end up paying a lower premium but will have to co-pay in case hospitalization takes place in metros or higher tiered cities. For MMR, we have considered policy variants that cover all geographies with no co-payment. Co-payment may help to bring the premium down but it’s restrictive and so policies with no co-payment get full marks.
The weightage of sub-limits on room rent remains at 7.5%. You need to be careful when buying a health insurance plan with sub-limit on room rents because usually other medical expenses are associated with the type of room you take and so you could end up paying the difference for not only the room rent but also all other medical costs should you opt for a higher room category than allowed. We have, however, increased the weightage on the no-claim bonus from 5.0% to 7.5% and given full marks to policies only if they bump-up your sum insured by 10% or more after a no-claim year. Given that medical inflation is more than 10%, a no-claim bonus of more than 10% definitely helps.
What the rating means
The weighted scores from each of these parameters are added up into a final rating. Policies that are rated A have scored the highest, subsequently they get pushed to lower categories of B and C.
But don’t stop with A-category products alone and junk other categories blindly, we recommend you spend some time online and look at the granular ratings where each parameter has been explained and scores given. Pick out a plan that meets your needs, is affordable for you and promises to come through when you make a claim. Visit www.livemint.com/mintmediratings for details on each plan.
