Improve The Scenario in The Insurance Sector
Amidst Challenges of Standardisation, Will Health Insurance portability, which is Scheduled to be Implemented from July 1 This Year, Improve The Scenario in The Insurance Sector.
It needs to be seen now as to why a customer would change the company – for better services or for lower premiums. Given the rise in claims (the incurred claim ratio of health was 111.13% in 2009-10 as against 105.95% in 2008-09), demand for higher level of health cover and medical inflation (proposed 5% service tax will further impact health insurance premiums), health insurance is definitely a bleeding portfolio. In such a scenario, a war based on lower premiums could be an altogether unlikely case. Nonetheless, overcharging and variations in rates of premium would be reduced.
So when you consider the transformative impact of this judgement, it could really make the industry more competitive and transparent. Players will be encouraged to ensure constant innovation & improvement in efficiency standards and services. When TRAI introduced it in the telecom sector on January 20 this year, a lot of migration of customers has been observed from one telecom service provider to the other (statistics from the Department of Telecommunication reveal that by the end of February 2011, Reliance Communication’s net loss of subscribers was pegged at 0.3 million while Vodafone’s net gain of subscribers was pegged at 0.19 million).
Whether or not the portability scheme in the health insurance domain will lead to a similar mass migration is even yet to be seen. Moreover, customer disatisfaction is strongly linked to those few (thankfully!) moments when the cover is actually needed. But portability will surely encourage more people to opt for health insurance for themselves and their families, as it reduces the potential consequences of choosing a wrong insurer. If statistics are to be believed, only 2% of Indians currently have health insurance, which constitutes about 20% of the overall insurance business in the country. However, a major concern for the insurance companies is the lack of an effective data-sharing mechanism with respect to policy holders.
Also, for effective portability, a standardised system and platform integration needs to be introduced. The guideline also does not clearly specify the extent of past transactional information to be shared by the policy holder, and this could prove to be an impediment. The rule may be a blessing where migration affects serviceability. But until proper policies, procedures and implementation mechanisms are in place, it may not move far beyond being a psychological bargaining chip.
So when you consider the transformative impact of this judgement, it could really make the industry more competitive and transparent. Players will be encouraged to ensure constant innovation & improvement in efficiency standards and services. When TRAI introduced it in the telecom sector on January 20 this year, a lot of migration of customers has been observed from one telecom service provider to the other (statistics from the Department of Telecommunication reveal that by the end of February 2011, Reliance Communication’s net loss of subscribers was pegged at 0.3 million while Vodafone’s net gain of subscribers was pegged at 0.19 million).
Whether or not the portability scheme in the health insurance domain will lead to a similar mass migration is even yet to be seen. Moreover, customer disatisfaction is strongly linked to those few (thankfully!) moments when the cover is actually needed. But portability will surely encourage more people to opt for health insurance for themselves and their families, as it reduces the potential consequences of choosing a wrong insurer. If statistics are to be believed, only 2% of Indians currently have health insurance, which constitutes about 20% of the overall insurance business in the country. However, a major concern for the insurance companies is the lack of an effective data-sharing mechanism with respect to policy holders.
Also, for effective portability, a standardised system and platform integration needs to be introduced. The guideline also does not clearly specify the extent of past transactional information to be shared by the policy holder, and this could prove to be an impediment. The rule may be a blessing where migration affects serviceability. But until proper policies, procedures and implementation mechanisms are in place, it may not move far beyond being a psychological bargaining chip.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
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