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COVID-19 insurance

By Tensing Rodrigues

A circular by the Insurance Regulatory and Development Authority of India (IRDAI) on March 4, 2020, directed the insurance companies as follows: a. Where hospitalization is covered in a product, insurers shall ensure that the cases related to coronavirus disease shall be expeditiously handled. b. The costs of admissible medical expenses during the course of treatment including the treatment during quarantine period shall be settled in accordance to the applicable terms and conditions of policy contract and the extant regulatory framework. c. All the reported claims under COVID-19 shall be thoroughly reviewed by the claims review committee before repudiating the claims.

  In addition, insurance companies have been advised to design products covering the costs of treatment for coronavirus.

  Of course this was a knee jerk reaction on the part of IRDAI to meet a sudden and unforeseen need. It was not possible to base the advisory on any actuarial study as such a study will be possible only after some time when loss experience data get collected. Therefore the immediate reaction of the insurers has been one, to extend the coverage of the existing health insurance plans to morbidity under COVID-19 and offer very simple, crude probability based covers.

  The ETMONEY plan we looked at last week is one example of the latter. Such plans give too small a cover as Rs 25,000 is grossly insufficient if you are seriously afflicted by COVID-19. And it cannot be renewed. However, you can take a ETMONEY type plan, in addition to a normal health insurance plan for an immediate financial relief in case you are afflicted with COVID-19.

  Real health cover, even if you have COVID-19 on your mind, needs to be sought under the existing plans of various insurers. If you wish to have it to cover all eventualities go straight for it. But, if you would not have gone for a health cover otherwise and you are seeking it only in anticipation of an unfortunate encounter with coronavirus, think twice. Because, under present circumstances, what is your chance of being infected by the virus?

  As we saw last time, using the data as on May 22, 2020, the chance was 0.000086. That is 86 persons out of 10,00,000 (ten lakhs) are likely to test positive; that is one out of 11,627 persons. Just to put that chance in proper perspective, a little less than two persons out of 11,627 are likely to meet with an accident; eight persons out of 11,627 are likely to be diagnosed of cancer; about three persons out of 11,627 are likely to die of heart attack and stroke.

  You can now take a call for buying an insurance cover. Also keep in mind IRDAI’s direction: ‘in accordance to the applicable terms and conditions of policy contract and the extant regulatory framework’; so do not expect any ‘special consideration’ for COVID-19; for insurance sake, there cannot be anything special about COVID-19.

  A health insurance cover is of three types. You can choose the type of plan you need or rather mix the three in required proportion. One plan is that which provides ‘medical reimbursement’; it is often called Mediclaim. But it may come under different names, as Mediclaim is the brand name used by some insurance companies.

   Under such a plan, as the name says, you can get reimbursement for the expenses incurred on hospital stay, medicines, tests and surgical procedures, subject to conditions and limits. A minimum of 24 hours of hospitalization is a must to make claim, and the claim has to be supported by bills. 

  The second type of plan is designed to meet your daily expenses, not necessarily on medical items; the plan may be named something like hospital cash or daily cash. There is no reimbursement; no bills are required; upon the proof of hospitalization, you are paid a fixed sum of money specified by the policy document for the number of days that you are hospitalized.

   The third is the critical illness plan. Here you can claim upon being diagnosed of one of the specified critical illnesses; you are paid a lump sum. No bills are required; only a medical certificate specifying the illness. This is like a term plan, covering critical illness. An illness is deemed to be critical if it renders you unable to work and earn; so it is treated financially equivalent to death. So a critical Illness plan works like a term plan. No hospitalization, no bills; just the diagnosis.

  You need to create a suitable package of the three plans for yourself. Preferably avoid a ready package of the three plans.

*The author is an investment consultant. Readers can send their comments and queries to tenala@gmail.com

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