How you can reduce health insurance premiums?

Insurance selling was long perceived with a bit of ridicule by larger section of our psyche. This image didn't help when mainstream movies depicted the insurance salesperson in most comical ways. Of course, the often-opaque nature of these products/solutions didn't help the cause either. Of late, I've been receiving innumerable calls from acquaintances, friends and others inquiring about insurance be it life and/or health. There's been a sudden resurgence of pull for these otherwise considered push solutions.

This sudden change has been mostly due to the ongoing pandemic and how it stretched financially those with or without a proper health insurance. And not to mention the huge economic loss incurred due to hospital expenses or the bereavement of a family member, particularly if that's the earning one. There has been an increased awareness among the populations for the need to have an insurance though years of communication by the insurance companies and their associates has been gradual. The new age (online/tech-oriented) companies either dealing in the distribution or manufacturing of these solutions have enormously helped the cause of penetration thanks to the apparent convenience it provided and matched preferences of the some of the younger generation of the population.

By and large, however, the attitude towards insurance is still not encouraging. Whenever insurance is mentioned, it's still seen with suspicion and the higher intermediation costs (which are very normalized by a large extent now). Also, by shutting to not being receptive, some of the product innovation is also not experienced by the needed. Unlike, the earlier product profiles where endowments ruled roost among the life insurance, there has been an avail of improved variations that benefit the insured.

Even the barebone term plan has revamped with certain in-built features of waiver of premium during certain events that would impact the servicing of the policyholder, even as one enjoys the life cover against any of the risks. The novelty of some of the riders are very contemporary and suits one by adding up to make it more bespoke. And then there are altogether products that addresses each of these riders as standalone. Most of the illnesses have a common history in the larger family and one could insure against any such risk by opting these kinds of products like critical illness care or cancer care and thus averting a higher economic loss upon these events.

The most common response I keep hearing from the younger lot is that they are in good health and so why the need for an insurance. But this is exactly the reason why one should look for an insurance. One should always remember that insurance is bought only through good health. This has to do with how an insurance company or product functions. What an insurance product does is that it provides protection against a huge loss, say, damage to life or property for a small premium that's paid through an installment.

For the insurance company, they take comfort in large numbers i.e., if they were to insure a large section of the population then the averages work in their favor. The historical statistics suggest that the mortality rate of a homogenous population remains stable or less prone to erratic behavior if normalcy is retained. Instances of war, nature fury or even a pandemic might upset this calculation, though. That's why one could see such exclusions in the wording of the document. However, the regulators in India have clearly come up and stated that the covid pandemic can't be excluded for either life or health of the insured. Even there were plans introduced by some of the players that were derived just to address this pandemic.

Hence, insurance companies would like to insure healthy individuals or property so that the cost of claims would be as per their models. To this, the underwriting processes are attuned to eliminate any such higher risks than the 'standard'. Standard risk is what an underwriter of an insurance company is willing accept and for any non-standard risk to be clubbed with the rest, an additional premium is charged. So, we find smokers are charged higher premium to non-smokers, aged vs younger and males have higher rates over female lives (as the mortality is relatively higher in males).

Another common misconception is the availability of coverage from the employer. The pandemic also taught us the vagaries of employment and the dependence of benefits through employment. It's always good to avail an insurance by the employer though it could be bettered through either having a top-up to the cover (in case of health) and altogether a standalone plan (both life & health) at a personal level. There are few benefits that one enjoys through a group (corporate/employer) cover but the most crucial among them is the coverage of pre-existing illnesses.

It's a condition of insurance protection against risks that are originated due to the existing illness or disease prior to opting of the plan. As per the IRDA (Insurance Regulatory and Development Authority), any condition, ailment or injury or related condition(s) for which there were signs or symptoms, and / or were diagnosed, and / or for which medical advice / treatment was received within 48 months prior to the first policy issued by the insurer and renewed continuously thereafter. So, by opting for a personal plan, declaring the existing illness but continue to renew beyond four years makes the personal plan at par with that of the employers. Also, it shields away any change in policy by the employer or even change in the employer.

Moreover, it's ideal to review the insurance cover at regular interval or at the time of changes in ones needs like, housing loan, new-born, etc. This helps one to get their insurance cover updated. An adequately insured individual could pursue his other goals at will and peace of mind. So lock-in cheaper premium for a higher coverage at a healthier times and at younger age.

(The author is a co-founder of 'Wealocity', a wealth management firm and could be reached at [email protected])