The poor customer experience with Health Insurance is one of the biggest reasons behind poor adoption among Indians - creates a negative flywheel. And if you double-click on the problem you will realise the push nature of Health Insurance is the root cause behind the poor experience. This push nature is true across the stakeholders from the supply side - Manufacturers, Brokers, Agents, bankers, Providers etc.
In general supply-side take advantage of “Subjectivity Available” in the system to push products and that changes the fundamental nature of product such as Insurance - converting an “Uncertain Risk” into a “Certain Prevention”. However, when a policyholder reaches out for Certain Prevention (Claim) a rejection means nothing but a loss of trust for the lifetime of the product.
If we need to create a negative flywheel, that would be something like this
Subjectivity = Uncertainty = Claim Rejection = Loss of trust and Negative Word of Mouth = Push = Use of Subjectivity
The only part of the market that is currently being benefited by Subjectivity is Supply-Side hence in most of the cases Supply-Side even promote this Subjectivity. We have tested this hypothesis on the ground using a Randomized Controlled Trial (RCT) in a sample size of 100 (We will publish that report soon). The Conclusion of the RCT: If you inform policyholders, at the time of purchase, about the potential downside of creating information asymmetry, 9 out of 10 times customers would change their Policy Information.
This is a known problem in the industry including the regulator - IRDAI. To solve this problem (let’s say minimize it, lol) IRDAI released a consultation paper - a draft of CIS (Customer Information Sheet) instructions for Health Insurance in Sep-23. Unfortunately, I read it a few days back, and I loved it - I would not say this is perfect.
The draft CIS/KYP (Know Your Policy) attempted to eliminate a few of the subjectivity, and I believe it will deaccelerate the growth of negative flywheel from the Health Insurance Industry.
Let me just highlight a few key pointers that I loved and also want the regulator to improve and work on further.
Not the existing Policy Doc: To start with this is not a policy document but rather a super concise, easy-to-go-through, sheet with all the key information of the policy.
Independent from Subjectivity: Healthcare Providers reject claims under the name of the Out-patient Department (OPD) but there is no defined definition of OPD this means it is a subjective term. However, now insurers must disclose Policy Coverage: Expenses in respect of:
- Admission in Hospital beyond xx hrs (This means it is essentially differentiating OPD, IPD, and Day Care just by defining the beyond xx hrs, brilliant)
- Pre-hospitalisation (treatment prior to admission in hospital) of xx days amounting to x% of claim) Eliminate the much-needed subjectivity around the claim amount for Pre-hospitalization.
- Specified/Listed procedures requiring less than xx hours of hospitalization (day care) [Kills all the subjectivity created by providers at the time of treatment]
- Undergoing specified procedure in case of xx hrs Critical illness [However, as the Critical illness itself is a subjective word, it would be great if IRDAI defined this term as well]
The rest of the policy coverages are clearly defined similarly.
Customer First Approach: Today if you go and ask many of the Health Insurance Policy Holders who are their TPA a significant % will lack the answer. And how each of the information will be available on the CIS/KYP along with Turn Around Time (TAR), Free Look Cancellation, Migration and Portability etc
Your Obligations: As I mentioned at the start the supply side promotes subjectivity, however, now before making payment customers will be reading the obligation and how creating information asymmetry will lead to claim rejection.
This is a good step in the direction of eliminating the subjectivity from Health Insurance and improving the customer experience ultimately deepening the Health Insurance penetration.