The move by IRDA, mandating life insurers to simplify policy wordings, must be applied to all insurers
It is clear that our government must simultaneously play two roles – a developmental role and a regulatory role ordable healthcare facilities
HR heads across sectors has been trying to rise to the challenge of high insurance cost and even considering if certain benefits can be withdrawn altogether. This requires employees to initiate focus on insurance benefits of all kinds on their own.
Employee Benefit Insurance has become an irreversible and integral part of Indian Inc.’s landscape in the past few years. It is also indubitable that health insurance continues to be the most valued component of this program, chiefly due to increasing medical costs and an uncertain environment, which is the central focus of my write up. In the past two years, organizations have faced enormous challenges in keeping this benefit alive in the most effective way despite enormous cost pressures.
This article comes from pure experiential learning and relates with the challenges I have seen organizations across sectors face in the employee benefit insurance domain. As pointed out by Vantage last year and they are fantastic in this space, health insurance premiums, after remaining soft for most of the last decade, have hardened significantly in the past year. The lack of cross-subsidy due to detariffing of rates, scarcity of funds and focus on profitability, has finally driven insurers to view health insurance as a standalone risk and fix the price accordingly. As a result, organizations now consider the inflationary movement of premiums to be the biggest challenge in maintaining the status quo of benefits.
My discussion with many organizations in this space including Vantage reaffirms the belief that insurers must elucidate the benefits and restrictions in the policy in simple and unambiguous terms. The move by IRDA, mandating life insurers to simplify policy wordings, must be applied to all insurers. Such measures will help avoid litigations and disappointments amongst claimants, thereby facilitating an environment of enhanced consumer trust. Lately, insurers have resorted to mid-term hikes in premiums or reductions in policy benefits. This practice is, quite naturally, a cause of concern for India Inc. Insurer needs to accept that the insured expects it to fully absorb all the accepted risks for the full course of the policy.
This space is less regulated - higher claims cost has not seen any noticeable effort to curtail hospitalization costs. Hospitals need to be regulated preferably by a separate governmental regulatory body, or else high treatment costs and therefore high claims will be the norm of the day, thus spiraling the cost back to organizations in the form of premiums. According to my discussions with Vantage, the increase in premiums for large firms (1,000 or more employees) has been comparatively higher than the smaller firms. This seems illogical at first glance. The reason larger firms have seen higher increase in premiums is because, in the past, they managed to negotiate much better rates. And now, the new market conditions have imposed a “correction” on them.
It is clear that our government must simultaneously play two roles – a developmental role (to educate the end consumer) and a regulatory role (to ensure adequate and affordable healthcare facilities). Organizations also need to play both these roles as this domain will continue to face enormous challenges if these roles are compromized either by the Government or by organizations.
It is natural to wonder if cutting on benefits is the answer.
HR heads across sectors has been trying to rise to the challenge of high insurance cost and even considering if certain benefits can be withdrawn altogether. Some of these benefits are dental care benefit, parental coverage or even partial or full OPD coverage, all of which lead to significant heartburn among employees. Companies have also tried to co-share the cost with employees (i.e. introducing a percentage of cost to be shared by the employees). This has been taken rather unpleasantly in most organizations since the claims costs can be very high sometimes and a junior or a middle management level employee would find it very tough to cover it all. This further creates issues for organizations to keep up with employee motivation and retention.
The need of the hour is that employees need to focus on insurance benefits of all kinds on their own. Organizations can also play a proactive role in encouraging employees to buy individual cover for themselves as well as their families both in the medical and life insurance. The awareness in this area is so less that it is a challenge to bring employees to the table to talk or explore this subject.
A large part of the apathy towards this lack of awareness and lack of initiative towards gaining knowledge on insurance aspect is also because insurance benefit is taken as a given by most employees. It is viewed as a mandatorily deemed benefit. Most employees live far away from the reality that this space is undergoing massive changes. In fact introduction of co-pay or reduction in benefits comes as a big shock to most of them.
Employee sensitization towards this aspect is therefore a subject that gains immense importance. Employees need to know when they are getting over treatment, or paying higher payments for health treatment costs than required. They need to know what should be their cover for accidental or life-term in insurance and what should they expect from organizations or what should they do personally to mitigate the risks involved.
Largely, the role of the insurance brokers has gone a change. Today they are no longer seen as just a matchmaker between the insurer and the client. Rather they provide value added administrative services which has been the demand of the Indian market.
Finally there is a need for organizations to effectively communicating the insurance benefits round the year to the employees. These benefits are to be taken for granted and employees have to understand this better in the present scenario, if organizations do not reduce the benefits provided. Economic changes have imposed significant cost and profitability pressures in all organizations across sectors and the focus on bottom-line would be enormous.
The way forward - for employees and organizations
Government and organizations must ensure people are educated on insurance benefits and start a drive to ensure adequate coverage per employee. The responsibility for this coverage is both with the employees’ (personal coverage) and benefit from the organization and the government;
Employees to start thinking on personal coverage seriously. HR would have to improve upon the “proactive education” of employees in this area. These benefits are not to be taken for granted (anything can change!), whereas their personal coverage is not negotiable;
Costs in this domain are not going to come down at least in the near term unless significant regulation comes into play at each process step of the insurance usage;
Mechanisms like co-pay and reduction in insurance benefits are not really the answer. Care needs to be taken before implementing these since this impacts employee motivation in a big way. With the mindset that insurance is a deemed mandatory benefit, any reduction in such a benefit would always lead to issues. The road is tough and HR would have to play a key role in treading and managing this huge task;
Third Party Administrators (TPA) as service providers have evolved and would continue to evolve offering higher value added services than what has been offered till date. A full-fledged advisory role is on its way;
Trends in the industry indicate preventive healthcare focus. However it is largely dependent on each employee’s outlook and understanding in this area even if organizations do their bit to set in healthy practices towards managing health of its workforce. The change therefore is more from within a fellow employee than being led by the organization alone.
Rajesh Rai is the Director HR, Benetton India