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How Health Insurance Companies can easily trick customers?

Health Insurance senior citizens


Many financial advisors ask clients/friends/family to purchase health insurance plans at an early age.

The reason is that you are able to lock-in your health conditions. Any illness that happens after your initial purchase of plan does not affect your insurance premium. Therefore, purchasing health coverage at a younger age may help keep your premiums low at an old age.

However, this approach may not guarantee you lower premiums at an old age.  Let’s see how.

I have been reading many instances of sharp hikes in health insurance premium for senior citizens over the last many months.

I read about a similar instance in Money Life magazine. In this case, the premium for a senior citizen couple (73 and 79) went up from Rs 34,969 per annum to Rs 63,281 per annum for a cover of Rs 3 lacs.

Essentially, their existing plan was discontinued and they were given an option to migrate/port to a new plan. The new plan had no new useful features (only a very high premium). Clearly, senior citizens don’t need maternity coverage. Do go through this article in Money Life for more in this matter.

What should that senior citizen couple do?

At 73 and 79, it is virtually impossible to go to a different insurer.  So, they have to cough up almost double the premium. If they can’t afford, they will have to discontinue coverage. However, letting go of health cover will expose them to serious financial risk.

Well, the elderly couple can’t be blamed. They have been short-changed.

Does the blame lie with the insurance company who either messed underwriting earlier or is simply being evil? Or does the blame lie with the insurance regulator that turned a blind eye to this manoeuvre?

We can leave the blame game for later. However, there is a bigger issue that needs to be addressed.

If such misdemeanours from the insurance companies are not nipped in bud, I can see a clearly laid out strategy by the insurance company to trick senior citizens.

Here is how this strategy will work.

How can a Health Insurance Company trick you?

  1. Year T: The Insurance Company launches a new Health Insurance Plan “A”.
  2. The plan is quite cheap and the insurance company markets it aggressively for the next 10 years (till T + 10 years). The insurance plan has very stringent underwriting norms and only the very healthy are issued such a plan. Since only very healthy people were taken in, you can expect the number of claims to be very less. So far, so good. Can’t blame insurance company for this.
  3. Year T+10: The company stops marketing plan A. Well, for the aggressive marketing part, plan B has replaced plan A. Only renewals are pursued for the Plan A.
  4. Year T+30: Holders of Plan A are now old and you can expect the number of claims in Plan A to rise from here on.
  5. Year T+30: Now, the insurance company deals a deadly blow.
  6. The insurance company discontinues plan A and gives the holders of Plan A to migrate to a very expensive Plan C.
  7. So, if you are 65 and were paying an annual premium of Rs 50,000, you get a letter than Plan A is being discontinued and you are being given a generous offer of migrating to Plan C that will cost you Rs 1.25 lacs per annum.
  8. Not just that, since you are migrating, you will lose the no-claim bonus. For instance, in Plan A, your base cover was Rs 5 lacs and you accumulated no-claim bonus sum insured of another Rs 4 lacs. Essentially, you were getting Rs 9 lac cover at the price of Rs 5 lacs cover.
  9. However, since you are migrating, the no-claim bonus goes away. If you want a cover of Rs 9 lacs under Plan C, then pay for Rs 9 lacs.
  10. Be rest assured. Plan C will be made a very expensive plan. Maternity coverage will be added to the plan.
  11. In my opinion, it is like putting a gun to your head and saying “My way or the Highway”. As a senior citizen, you will anyways find it difficult a purchase a new plan (especially when you have contracted a serious illness).
  12. The only option you have is either to pay a higher premium or let the policy lapse (and lose health insurance coverage).
  13. This is a win-win for the insurance company. If you let the policy lapse, they have collected premiums for all the good-health years. If you sign up for the higher premium, the insurer collects a higher premium for potentially lesser coverage.

By the way, even this offer of migrating to the new plan is subject to portability conditions. For all you know, your application may be denied under the new plan.

I copy an excerpt from IRDA Health Insurance Regulations, 2016.

Chapter III(11): Designing of Health Insurance Policies (Clause c)

The insurer shall not compel the insured to migrate to other health insurance products. In case of migration from a withdrawn product, the insurer shall offer the policyholder an alternative available product subject to portability conditions.

And portability is not your right. The insurer exercises the discretion.

Therefore, an insurance company can even pick and choose its customers. It can deny coverage to old customers who are not in the pink of health.

For more on issues with Health Insurance Portability, read these posts.

Read: All you need to know about Health Insurance Portability

Read: How Insurance Companies are making a mockery of Health Insurance Portability?

Won’t you feel cheated?

If such is the approach of the insurers, you will happily pay the premium for 25-30 years (and perhaps not even make a claim) and suddenly realize that you have been short-changed.

Purchase at a younger age and years of timely premium payments means little.

Consider this. New India Assurance is owned by the Government. Such companies follow very generous underwriting norms (especially group insurance plans) and you can expect some kindness from them. However, if this is what a Government company is doing, I just can’t imagine what private insurance companies can do.

Health Insurance Companies are already tricking customers by changing plan structures

I have a health insurance plan from a private insurer. This year, when I went for renewal, I found out my premium had gone by almost 40%. When enquired, I was told that the plan had been restructured (many fancy features were added) and this has led to an increase in premium. As per the company, I was also sent a communication many months back in this regard. Of course, I never received any letter or e-mail.

By the way, I am nowhere close to being a senior citizen. Therefore, the insurance companies are doing this to younger people too. Even though, in my case, they didn’t discontinue the plan. They merely changed the same plan and increased the premium.

I was too lazy to fight about it and try to port my policy to another insurer and hence renewed the plan.

Points to Note

  1. Health insurance premium typically increases every year.
  2. However, there are a few limitations on how frequently they can revise premium tables.
  3. Withdrawing the existing product and forcing customers into a new one is an easier approach.

What can you do about it?

Absolutely nothing.

Only the regulator can. In this case, the regulator is IRDA.

In my opinion, if IRDA is the judge, you can get away with murder or even genocide of consumer interest. In this case, the insurance company is merely increasing the premium.

The redressal system laid down by IRDA does not work.

I can only hope IRDA can rise to the occasion and help many hapless senior citizens. IRDA’s record suggests otherwise but my hope springs eternal.

As for you, you still need to purchase health insurance at a young age and keep paying premiums.

13 thoughts on “How Health Insurance Companies can easily trick customers?”

  1. Deepesh,
    Democracy in India is by the politicians for the politicians of the people.
    IRDA is by the Insurance companies for the Insurance companies of the people.

    Where does the people come in both of the above? At the end and are there to be taken advantage of.
    Health insurance companies are in turn taken advantage of by hospitals who fleece them whenever cashless claims comes into the picture. Companies don’t do anything to inquire the high costs.
    Somebody is becoming rich and its not the common people in this country, but they will be left to die badly.

    1. Deepesh Raghaw

      Hi Pradeep,
      I understand your concern.
      In absence of good public healthcare system, many are forced towards private healthcare.
      Private hospitals have been exacting a heavy price from the customers and yes insurance companies too.
      Insurance companies won’t do anything to the private hospitals but will put you in under duress.
      By the way, even those who do not have health insurance are billed quite aggressively.

      One more thing, public insurers have negotiated much better rates with most private hospitals. Due to this, medical bill for a public insurer is lower than private insurer. Funny but that’s the way it is. This is business.
      Search for GIPSA.

      1. Deepesh,
        You are right. Even big private Corporates have their group insurance for their employees with public sector companies. They offer better rates and flexibility as well.
        I have heard doctors from big hospitals suggest to go for reimbursement in which case the bill amount will be less compared to cashless facility.
        The uninsured are hopeless if they get caught in an accident or any illness. One such incident and their family is doomed.
        It seems the insured is also in the same situation as the uninsured.

  2. I realized that health insurance plans for self-employed are pretty much useless very early. Make some claims (even for one-off fever related hospitalisation) and you will immediately come to know what these health insurance plans are worth. Claims could be settled, but renewal isn’t guaranteed.

    Medical debt & bankruptcy is a real threat to young and old in this country. I have seen folks fall into huge debt, sell their homes and exhaust their retirement money to pay medical bills. Some endure this after losing their loved ones. IRDA could possibly regulate the insurance companies. But who will fix greedy hospitals / healthcare industry? Adya Singh dengue death case is just a tip of the iceberg.

    1. Deepesh Raghaw

      Hi Vasu,
      Renewals are mandatory. The insurance company can’t deny renewal (unless they play the trick of changing the product) based on claims experience.
      Your experience must be before 2013. I have seen a few cases where the policyholders make claim for the full amount every year and still insurers renew their policies.
      I completely agree with your second point. It is difficult to fix the greedy hospitals unless Government wants to. Health insurance plans can help only to an extent. Perhaps, one way out is to figure out non 5-star hospitals where you get good treatment at a reasonable price.

      1. This was in 2014. I tried to renew online, but got an error message asking me to contact the insurance office because there was one claim. The one claim was for my daughter who was hopitalised for fever. Note that this claim was the first one since 2011. I received no response when I contacted the insurance representatives by emails. I was too busy at that time to visit the insurance office and so it got discontinued. Renewals may be mandatory, but they can still make the renewal process difficult if there’s a claim.

        1. Deepesh Raghaw

          Hi Vasu,
          Yes, that’s correct. They can create a lot of problems. They are aware that many will simply give up.
          IRDA is quite effete, which also compounds problems.
          The insurance companies do not really smell of roses. If they can reject a claim, they will. If they can deny a rightful renewal, they will.
          At the same time, awareness of regulations will help customers.
          With such awareness, at least a blatant violation, as it seems in your case, can be stopped.
          Moreover, swift escalation to the right person also helps in such cases.

  3. Is there a petition regarding these issues? Or can someone who is well informed (author?) take the lead and start a petition. seems to have some impact from what I’ve seen.

    1. Deepesh Raghaw

      Hi Fahd,
      Money Life keeps highlighting such issues on a regular basis. And it is not that regulators are not aware.

  4. What is the point of starting early if they are going to increase the premium anyway? Shouldn’t we wait? Please clarify. Thanks!

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