CHAPTER 1

INSURANCE

Page 1

INTRODUCTION TO INSURANCE
Insurance is a protection from risk as the man is perennially exposed
to risk.
Life may stop suddenly with a heart attack. The house may
unexpectedly catch fire and be gutted the crop may be lost by vagaries of
nature, draught, disease or flood. The motor Car may be badly damaged in a
road accident, thus, risk of different kinds resulting in loss are Inevitable in
life. Insurance provides an answer by providing protection to persons from
such Contingencies.
Insurance is coverage by contract where by one party (insurer)
agree to indemnify or guarantee another (insured) against loss by a specified
contingent event or peril and or an unfortunate event. The aim of all types or
classes of insurance is to afford protection to the Insured from the risk, which
he apprehends or anticipates. The protection from insurance is available to
the insurer not in preventing the event happening but in indemnifying the
insured from the loss he has sustained. Insurance is a major component of
the financial sector. It is a risk transfer mechanism, whereby an insured
transfers a risk exposure to an insurer in consideration for the payment of
premium.
Health care insurance or health insurance is a contract
between a policyholder and a third-Party payer or government program to
reimburse the policyholder for all or a portion of the cost of medically
necessary treatment or preventive care provided by health care Professionals.
The subject matter of insurance is PROPERTY, PREMIUM, and LIABILITY.

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1.2 Functions of Insurance

The function of insurance is two folds. In the first instance it
transfers or shifts a risk from one individual to a group and secondly, the
losses are shared, on some equitable basis by all members of the group.
Insurance is a device where- by the risk of financial loss accruing from death
or disability, or damage to, or destruction of property owing to perils to which
they are exposed is passed on to another. The insurer, of course, collects an
agreed rate of contribution from a large number of people and relieves the
insured partly, if not wholly, from the effects of loss by paying the insurance
money.
Contract of Insurance
A contract of insurance is an agreement whereby one party called
the Insurer Undertakes, in return for an agreed consideration, called the
Premium, to pay the other party namely, the Insured a sum of money or its
equivalent in kind, upon the occurrence of specified event resulting in loss to
him.
The Policy is a document, which is an evidence of the contract of
insurance. The contract of insurance is governed by the law of contract as
embodied in the Indian Contract Act, 1872. All insurance contracts must have
the following five essential elements in order that they may be legally
enforceable.
Offer and acceptance:
The person who wants to take up cover against particular perils
offers his risk through a proposal form to the insurance company.
Consideration:
The premium paid is the consideration and on its receipt by the
insurance company the contract of insurance comes into force.

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Consensus Ad Idem:
The parties to the contract must be of the same mind and there
should be a complete and unbiased agreement between the insurer and the
insured regarding the terms of the contract. The intention of the insured
should have been clearly understood by the insurance company.
Capacity to Contract:
Both the parties must be legally competent to enter into an
agreement. The parties to the contract should not be of unsound mind. They
must have attained the age of majority and should not have been declared as
insolvent.
Legality of the Object of the Contract:
The purpose for which the agreement is entered into should be
legal and not opposed to public policy.

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1.2 Basic Principles of Contract of Insurance

Insurable Interest:
A contract of insurance does not undertake to prevent the
occurrences of the peril insured against. What it provides is a promise to
make good the financial loss caused by the operation of the insured peril.
Utmost good faith:
Law requires both the parties to the contract to observe good
faith, which means absence of fraud. Insurance contracts are subjected by
law to a higher duty namely of utmost good faith. The proposer has a duty to
disclose to the insurer all material facts which he knows and which he ought
to known. A material fact is facts which affect the judgment of a prudent
underwriter deciding whether to accept the risk and if so, at what rate of
premium and subject to what terms and conditions.
Indemnity:
Indemnity means compensation for loss or injury. It also means
security or protection against loss or damage. Insurance contracts promise to
make good the loss or damage limiting it to the amount of loss or damage
subject to the sum insured.
Subrogation and Contribution:
Subrogation is defined as the transfer of right and remedies of the
insured to the insurer who has indemnified the insured in respect of the loss.
Proximate Cause:
The object of insurance is to provide indemnity not for any loss
but only for such losses as are caused by insured perils. The perils insured
are clearly stated in the policy and the liability of the insurer arises only if the
loss is caused by these perils.

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1.3 Objective of the study

1. To know about the risk covered in health insurance.

2. To protect in the event of unexpected loss, but due to reasons
associated with health care costs.
3. To make health insurance important for many people.
4. To ensure quality services to the customers.
5. To provide the superior selling skills to market quality products and
services that provides best insurance value for consumers.
6. To provides direct payment or reimbursement for expenses
associated with illness & injuries.
7. To protects you & your dependents against any financial constraints
arising on account of a medical emergency.
8. To cover the ever rising medical expenses. It is affordable & carries
the assurance & freedom from insecurities that threaten normally
now & then.
9. To save you from buying a policy which might not be appropriate
for you & can also be expensive.

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1.4 Types of Insurance in India

Insurance in India can be broadly categorized into two types: life

and general. Life insurance can be further classified into term life insurance,
whole life insurance, money back plan, endowment policy and pension plan.
Health, home, accident, motor and travel insurances fall under the general
insurance category. State-owned companies like Life Insurance Corporation
of India, as well as private insurance providers, like ICICI Prudential and Bajaj
Allianz, provide life and general insurances in India.

LIFE INSURANCE :
Life insurance is a contract between an insurance policy holder
and an insurer, where the insurer promises to pay a designated beneficiary a
sum of money (the "benefits") upon the death of the insured person.
Depending on the contract, other events such as terminal illness or critical
illness may also trigger payment. The policy holder typically pays a premium,
either regularly or as a lump sum. Other expenses (such as funeral expenses)
are also sometimes included in the premium; however, in Australia the
predominant form simply specifies a lump sum to be paid on the policy
holder's death.
Term Life Insurance Policy:
As its name implies, term life insurance policy is for a specified
period. It lets you select the length of time for which you want coverage, up to
a period of 35 years. It has one of the lowest premiums among insurance
plans and also carries an added advantage of fixed payments that do not
increase during your term. In case of the policy holder's untimely demise, the
benefit amount specified in the insurance agreement goes to the nominees.

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Whole Life Insurance Policy:

Whole life insurance policies do not have any fixed term or end
date and is only payable to the designated beneficiary after the death of the
policy holder. The policy owner does not get any monetary benefits out of this
policy. Because this type of insurance involves fixed known annual premiums,
it's a good option if you want to ensure guaranteed financial benefits for
surviving family members.
Money Back Plan:
With a money back plan, you receive periodic payments, which
are a percentage of the entire amount insured, during the lifetime of your
policy. It's a plan that offers insurance coverage along with savings. A unique
feature of the money back plan is that in the event of the policy holder's death
during the policy term, the beneficiary will get the full sum assured without
having any of the survival benefit amounts, which have already been paid,
deducted.
Pension Plan:
Pension plans are different from other types of life insurance
because they do not provide any life insurance cover, but ensure a
guaranteed income, either for life or for a certain period. You make the
investment for a pension plan either with a single lump sum payment or
through installments paid over a certain number of years. In return, you get a
specific sum every year, every half-year or every month, either for life or for a
fixed number of years.
Endowment Policy:
An endowment policy can be taken out for a specified period.
At the end of the stipulated period, the assured amount is paid back to the
policy holder, along with the bonus accumulated during the term of the policy.
Designed primarily to provide a living benefit, along with life insurance

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protection, the endowment policy makes a good investment if you want

coverage, as well as some extra money.
GENERAL INSURANCE:
Insurance other than Life Insurance falls under the category
of General Insurance. General Insurance comprises of insurance of property
against fire, burglary etc, personal insurance such as Accident and Health
Insurance, and liability insurance which covers legal liabilities. There are also
other covers such as Errors and Omissions insurance for professionals, credit
insurance etc.
Non-life insurance companies have products that cover
property against Fire and allied perils, flood storm and inundation, earthquake
and so on.The non-life companies also offer policies covering machinery
against breakdown,there are policies that cover the hull of ships and so on. A
Marine Cargo policy covers goods in transit including by sea, air and road.
Further, insurance of motor vehicles against damages and theft forms a major
chunk of non-life insurance business. Accident and health insurance policies
are available for individuals as well as groups. A group could be a group of
employees of an organization or holders of credit cards or deposit holders in a
bank etc. Normally when a group is covered, insurers offer group discounts.

Health Insurance:
Under the general insurance category, health insurance is one
of the most popular choices. In India, Mediclaim covers hospitalization,
expenses incurred during medical tests and for medicines. You can also get
coverage for medical expenses by opting for the 'Critical Illness (CI)' rider
available with life insurance policies. This means that in case of a 'critical
illness' as defined by the insurance company during the policy tenure, you will
be paid the amount as proposed in the policy.

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Vehicle insurance:
Vehicle insurance

(also known as auto insurance, gap

insurance, car insurance, or motor insurance) is insurance purchased for cars,

trucks, motorcycles, and other road vehicles. Its primary use is to provide
financial protection against physical damage and/or bodily injury resulting
from traffic collisions and against liability that could also arise therefrom. The
specific terms of vehicle insurance vary with legal regulations in each region.

Home insurance:
Home insurance, also commonly called hazard insurance or
homeowner's insurance (often abbreviated in the real estate industry as HOI),
is the type of property insurance that covers private homes. It is an insurance
policy that combines various personal insurance protections, which can
include losses occurring to one's home, its contents, loss of its use (additional
living expenses), or loss of other personal possessions of the homeowner, as
well as liability insurance for accidents that may happen at the home or at the
hands of the homeowner within the policy territory. It requires that at least one
of the named insureds occupies the home. The dwelling policy (DP) is similar,
but used for residences which don't qualify for various reasons, such as
vacancy/non-occupancy, seasonal/secondary residence, or age.

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CHAPTER 2
HEALTH
INSURANCE

Page 11

HEALTH INSURANCE
2.1 Introduction:
Human life is subject to various risks- risk of death or disability
due to natural or accidental events. The term health plan is often used to
provide health care insurance. People buy health insurance for different
reasons and health insurance premiums seem to be higher but more
attractive among higher income group especially the rich. In selecting health
insurance, a person must understand the various risks associated with the
different types of insurance available today. Not all insurance is equal. Each
type of insurance has its own strengths and weaknesses. The wrong health
insurance choice can place financial future in severe jeopardy. Most important
criteria in selecting the health insurance should be minimum premium and
maximum insurance coverage. Generally, the insurer adopts mini-max
strategy.
In this context, the authors have attempted to exhibit the
various schemes and plan available for health insurance, and suggested the
most appropriate health insurance for attainting sustainable living. Humans
are also prone to diseases, the treatment of which may involve huge
expenditure. Health insurance is one of the most controversial forms of
insurance because of the perceived conflict between the need for the
insurance company to remain solvent versus the need of its customers to
remain healthy, which many view as a basic human right. Critics of private
health insurance claim that this conflict of interest is why governmental
regulations of health insurance companies are necessary.

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2.2 History of health insurance:

Some people think of health insurance as a recent
development in human history. But concern for financial loss resulting from
accident and illness can be traced to ancient civilizations. Health insurance,
limited primarily to disability income in case of accident existed in the early
history of Rome. This tradition continued in Europe in the middle Ages, and by
the 17th century there were laws providing sickness insurance for seamen
and dismemberment insurance for soldiers. Health insurance today is a broad
array of coverage providing for the payment of benefits as a result of sickness
and injury. It includes insurance for losses from medical expense, accident,
disability, and accidental death and dismemberment (AD&D).
Features of Health Insurance:
There are three basic types of health insurance policies. One
is Straight Life Policy, which guarantees to cover the person against the odds
throughout the life span up to 100 years. The next basic type of policy is
Limited Pay Life policy but one can restrict the time for which one wishes to
pay the premium.
One can make the payments till sixty-five years of his age
continuously for 10 years. Single Premium Life is the other basic type of
health insurance in which an individual makes a lump sum premium. Many
additional features are even offered by insurance companies, such as
accidental coverage and many more alike.
Function:
Health insurance is coverage that is provided for medical
care. Most medical costs incurred from a routine doctor's visit to a visit to the
emergency room are the responsibility of the insurance carrier. Partial or full
payment of the monthly premium is typically deducted from an employee's
wages. The covered individual usually has some out-of-pocket expense, such
as a co-payment or deductible.

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2.3 Importance of Health Insurance

People buy health insurance for different reasons. The following are some of
the reasons:

Health insurance can protect you from the risk of uncertain bills for
health care.

Without health insurance, you may not be able to afford expensive

services.

Health insurance can pay for services that you use often.

Health insurance an help you to get better quality care as a member of

a coordinated health plan than you would get on your own.

With health insurance, you do not have to worry about the cost of care
when you are sick.

The additional money provided by health insurance when you are sick
may be more valuable to you than money when you are well.

If you have more dependents than most people, then you may get
more out of a family policy for health insurance.

If you or your dependents than most health care needs than most
people and you only pay an average premium, then you get more from
health insurance than most people.

You do not pay income tax on health insurance benefits so it is more

valuable per dollar than the same amount in taxable pay; and

Health insurance companies generally pay lower prices to Doctors and

hospitals than you would pay on your own.

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Why Health Insurance?

Medical expenses are sky high these days. An appointment
with a doctor might churn out big bucks. The elaborate medical treatment
expenses could eat into your savings meant for the future. Health insurance
policy kicks in to ensure that you get the required treatment and your pocket
is still under control. Having health insurance is important because the
coverage helps people get timely medical care and improve lives and health.
It covers the risk of financial difficulties in the event of long illness. The
awareness has been enormous in the last couple of years. This must have
been in response to the series of uncertainties people have observed in
recent times like the terror attacks.
BENEFITS:

Benefit depends on the policy you choose and the coverage it

provides. Here is a list of basic coverage provided by most of the
health policies.

It helps securing a better future by paying a fraction as an expense

today called the premium.

It reduces saving huge amount of financial losses, risk of financial

breakdown in case of expensive medical and post-illness care.

It definitely induces a sense of security to the insured.

It provides financial security to the family members.

It covers your hospitalization and medical bills.

It also covers disability and custodial bills.

You can avail tax benefits on the premium paid under section 80D of
the Income Tax Act.

The best factor, you can also opt for health insurance policies even
after the age of 60.

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2.5 Advantages of Health Insurance:

Buying a health insurance policy can prove to be beneficial and one

can make most of it by taking cover against the odds and uncertainties
of life. It is advisable to buy the health insurance policy from some
credible insurance company as they facilitate in the better treatment of
the person. It facilitates an individual to be treated well in time and
private rooms and timely services are offered.

As life is more precious than anything therefore one must not

compromise on the cost of the health insurance policy. With the
increasing competition, companies are now coming up with more
comprehensive and cost effective policies so as to cater to the
personalized needs of the customer.

There are many advantages, which an individual can bag in many of

them. Some of the benefits, which come with the health insurance, are
childbirth and well baby, critical illness and consultation fees coverage.
Disadvantages of Health Insurance:

There are few limitations of these health insurance policies. The health
insurance company has the right to accept or deny the application. If
the health insurance company feels that an individual is susceptible to
more ailments then the health insurance company will refuse to provide
the cover.

The premium to be paid is never fixed; it can be changed by the

company depending on the change in the health insurance policy of the
government. Health insurance companies at times fail to honor the
deed and this leaves the insured in a fix. At times people do not give
their true medical history and this compels insurance companies to
contravene the deed.

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2.6 What is TPA (Third Party Administrators)?

TPA stands for Third Party Administrator. TPA is a
middleman between Insurer and the Customer. Customer can directly deal
with TPA at the time of claim and TPA will help with all the process of claim
settlement. A TPA is a specialized health service provider rendering variety of
services like networking with hospitals, arranging for hospitalization and claim
processing and settlement. The concept of TPA has been introduced by the
IRDA (Insurance Regulatory and Development Authority of India) for the
benefit of both the insured and the insurer. While the insured is benefited by
quicker & better health service, insurers are benefited by reduction in their
administrative costs, fraudulent claims and ultimately bringing down the claim
ratios. An insurance company can have more than one TPA and a TPA can
serve more than one insurance company. Some of the services TPA provides
are

Maintain database of policyholders

Issue of identity card to all policyholders=

Provide ambulance service

Provide information to policyholders about hospitals.

Check various investigations

Provide Cashless service

Process claims.

Third Party Administrators and their Role:

Third Party Admistrator (TPA) was introduced through the
notification on TPA-Health Services Regulations, 2001 by the IRDA. Their
basic role is to function as an intermediary between the insurer and the
insured and facilitate the cash-less service of insurance. For this service they
are paid a fixed per cent of insurance premium as commission.

This

commission is currently fixed at 5.6 per cent of premium amount.

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CHAPTER 3
HEALTH
INSURANCE IN
INDIA

Page 18

HEALTH INSURANCE IN INDIA

Health insurance can be defined in very narrow sense where
individual or group purchases in advance health coverage by paying a fee
called "premium". But it can be also defined broadly by including all financing
arrangements where consumer s can avoid or reduce their expenditures at
time of use of services. The health insurance existing in India covers a very
wide spectrum of arrangements and hence the latter - broader interpretation
of health Insurance is more appropriate. Health insurance is very well
established in many countries. But in India it is a new concept except for the
organized sector employees. In India only about 2 per cent of total health
expenditure is funded by public/social health insurance while 18 per cent is
funded by government budget. I n many other low and middle income
countries contribution of social health insurance is much higher.
Percentage of total health expenditure funded through public/social insurance
and direct government revenue

Country

Social Health

Government Budget
Insurance

Algeria

37

36

Bolivia

20

33

China

31

13

Korea

23

10

Vietnam

20

India

18

It is estimated that the Indian health care industry is now

worth of Rs. 96,000 crore and expected to surge by 10,000 crore annually.
The share of insurance market in above figure is insignificant. Out of one
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billion population of India 315 million people are estimated to be insurable

and have capacity to spend Rs. 1000 as premium per annum. Many global
insurance companies have plans to get into insurance business in India.
Market research, detailed planning and effective insurance marketing is likely
to assume significant importance. Given the health financing and demand
scenario, health insurance has a wider scope in present day situations in
India. However, it requires careful and significant effort total Indian health
insurance market with proper understanding and training.

The graph shows sharp rise in the penetration of the Health

Insurance in India after1999. This was due to the policy change by IRDA
(Insurance regulatory and development Authority) and private players were
allowed to enter the health insurance segment.

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3.1 Sources of health insurance in India

3.1.1. Mediclaim policy (individual)
The

policy

Hospitalization/Domiciliary

provides

hospitalization

for
expenses

reimbursement
for

of

illness/disease

suffered or accidental injury sustained during the policy period.

The policy pays for expenses incurred under the following heads:
Room, boarding expenses in the Hospital/Nursing home.
Nursing expenses.
Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialist
fees.
Anaesthesia, Blood, Oxygen, Operation theatre charges, Surgical
Appliances, Medicines and Drugs, Diagnostic Materials, and X-ray,
Dialysis, Chemotherapy, Radiotherapy, Cost of pacemaker, Artificial
Limbs and Cost of organs and similar expenses.

The liability in respect of all claims admitted during the period of

insurance shall not exceed the sum insured for the person as
mentioned in the schedule.

Reimbursement is allowed only when treatment is taken in a hospital or

nursing home which satisfies the criteria specified in the policy.

Expenses on hospitalization for minimum period of 24 hours are

admissible. However, this time limit is not applied to specific treatment
i.e. Dialysis, Chemotherapy, Radiotherapy, Eye Surgery, Dental
Surgery, Lithotripsy(Kidney stone removal), D&C, Tonsillectomy taken
in the hospital/ nursing home and the insured is discharged on the
same day; the treatment will be considered to be taken under
hospitalization benefit.

Relevant medical expenses incurred during period up to 30 days prior

to and period of 60 days after hospitalization are treatment as part of
the claim.
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Domiciliary hospitalization benefit

This means medical treatment for a period exceeding 3
days for such illness/ injury which in the normal course would require
treatment at the hospital/ nursing home but actually taken whilst confined at
home in India under any of the following circumstances namely:
The condition of the patient is such that he / she cannot be
removed to the hospital/ nursing home or The patient cannot be removed to
hospital / nursing home for lack of accommodation therein.
However this benefit does not cover:
1. Expenses incurred for pre and post hospital treatment and
2. Expenses incurred for treatment for any of the following diseases:
Asthma, Bronchitis, Chronic nephritis, Diarrhea and all type
of dysenteries including Gastroenteritis, Diabetes mellitus and insipidus,
Epilepsy, Hypertension, Influenza, cough and cold, All psychiatric or
psychosomatic disorders, Pyrexia of, unknown origin for less than 10 days,
Tonsillitis and upper respiratory tract infection including laryngitis and
pharyngitis Arthritis, gout and rheumatism.
Under the policy any one illness means continuous period
of illness and it includes relapse within 45 days from the day of last
consultation with the Hospital / Nursing home where treatment may have
been taken. Occurrence of same illness after a lapse of 45 days will be
considered as fresh illness for the purpose of this policy.

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No claim is payable in respect of the following:

All diseases/ injuries which are pre- existing when the cover incepts for
the 1st time.

Cost of spectacles and contact lenses, hearing aids. (these may be

termed as normal maintenance expenses).

Dental treatment or surgery of any kind unless requiring hospitalization.

Various conditions commonly referred to as AIDS.

Expenses on vitamins and tonics unless forming part of treatment.

Treatment arising from childbirth including Caesarean section (can be

deleted, if maternity benefit is covered).

Voluntary medical termination of pregnancy during the first 12 weeks

from the date of conception.

Naturopathy treatment.

Any disease other than those stated in clause(c ) below, contracted by

the insured person during the first 30 days from the commencement
date of the policy. This exclusion shall not however, apply if in the
opinion of Panel of Medical Practitioners constituted by the company
for the purpose, the insured person could not have known of the
existence of the disease or any symptoms or complaints thereof at the
time of making the proposal for insurance to the company.

This condition shall not however apply in case of the insured person
having been covered under this scheme or group insurance scheme
with any of the Indian insurance companies for a continuous period of
preceding 12 months without any break.

During the first year of the operation of the policy the expenses on
treatment of diseases such as Cataract, Benign Prostatic Hypertrophy,
Hernia, Hydrocele, Piles, Sinusitis and related disorders. If these
diseases are per- existing at the time of proposal they will not be
covered even during subsequent period of renewal.

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Age limit:

This insurance is available to persons between age of 5 years- 80

years children between the age of 3 moths and 5 years of age can be
covered provided 1 or both parents are covered concurrently.

Family discount

This discount of 10% in the total premium is allowed to a family

comprising the insured and any 1 or more of the following

spouse

dependent children (i.e. legitimate or legally adopted )

dependent parents

Cumulative Bonus:
The sum insured is increased by 5% for each claim free
year of insurance subject to a maximum accumulation of 10 years. In the
event of a claim, the increased percentage will be reduced by 10% of the
sum insured at the next renewal but the basic sum insured will remain the
same.
Cost of Heath Checkup:
The insured shall be entitled to reimbursement of medical
check up once in every 4 underwriting years subject to no claim preferred
during this period. The cost shall not exceed 1% of the average sum insured
during the block of 4 years. (Note: Both the above benefits apply in respect of
continuous insurance without break. In exceptional circumstances maximum
7 days break is allowed subject to medical examination.)
Extension of cover:
The cover can be extended to Nepal and Bhutan with prior
permission.

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Conditions:
The more important conditions provide for the following:

preliminary notice of claim with particulars relating to policy number,

Name of insured person in respect of whom claim is made, Nature of
illness/ injury and Name and address of the attending medical
practitioner/ hospital/ nursing home should be given by the insured
person to the company within 7 days from the date of hospitalization,
domiciliary hospitalization.

Final claim with original receipted bills, cash memos, claim form and list
of documents as listed in the claim form etc. should be submitted to the
company within 30 days from the date of completion of treatment.
(Note: in extreme cases of hardship to the insured, these limits may be
waived.)

Sum insured and premium:

The sum insured is available from Rs.15000/- with multiples of

Rs.5000/- upto a maximum of Rs.500000/-.

Domiciliary hospitalization limit is fixed at 20% of the total sum insured

upto Rs.1 lac and 15% beyond Rs.1 lac. The domiciliary hospitalization
is a part of the overall limit of sum insured.

The premium is related the age of the person and to the sum insured
selected by the insured.

Premium upto Rs.10000/- qualifies for tax benefit under section 80D of
Income tax act.

Proposal form:

The proposal form incorporates a prospectus which gives details of the

cover, such as coverage, exclusions, provisions etc.The proposer has
to sign it as having noted its contents.

The special features of the declaration to be signed by the proposer

are as follows.

Page 25

The insured person consents and authorizes the insurer to seek

medical information from any hospital/ medical practitioner who has at
any time attended or may attend concerning any illness which affects
his physical or mental health.

The insured person confirms that he has read the prospectus forming
part of the form and is willing to accept the terms and conditions.

The declaration includes the usual warranty regarding the truth of the
statement and the proposal form as the basis of the contact.

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3.1.2. Group Mediclaim policy:

The

group

mediclaim

is

available

to

any

Group/

Association/ Institution/ Corporate body of more provided it has a central

administration point and subject to a minimum number of persons to be
covered. The group should fall clearly under the same categories as specified
for group P.A.policy.
The group policy is issued in the name of the group/
association/institution/corporate body (called insured) with a schedule of
names of the members including his/her eligible family members (called
insured persons) forming part of the policy.
The coverage under the policy is the same as under individual mediclaim
policy with the following differences:

Cumulative bonus and health check up expense are not payable.

Group discount in the premium is available.

Renewal premium is subject to bonus/malus clause.

Maternity benefit extension is available at extra premium.

Group discount:
The group discount is allowed according to scale
depending upon the total number of insured persons covered under the
group policy at the inception of the policy as in group P.A.policy.

Bonus/malus:
Low claim ratio discount (bonus)
Low claim ratio discount is allowed on the total premium
at renewal only depending upon the incurred claims ratio for the entire group.
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(Incurred claims means claims paid plus claims outstanding at the end less
outstanding at the beginning of the period in respect of the group insured
under the policy during the relevant period)
The discount ranges from 5 %( claims ratio not exceeding 60%) to 40 %(
claim ratio not exceeding 25%).
High claim ratio loading (malus):
On the same basis of incurred claims ratio, loading is
applied to the renewal premium for adverse claims experience. The loading
ranges from 25% (ratio between 80% and 100%) to 150% (ratio176%to
200%). If the ratio is over 200% cover is reviewed.
Maternity expenses benefit extension:
This is an optional cover which is available on payment
of 10% of the total basic premium for all the insured persons under the policy.
Total basic premium means the total premium computed before applying
group discount and/or high claim ratio loading. Low claim discount and
special discount in lieu of agency commission.
Option for maternity benefits has to be exercised at the
inception of the policy period and no refund is allowable in case of insureds
cancellation of this option during currency of the policy.
The maximum benefit allowable is upto Rs.50000/- or
the sum insured opted by the member of the group, whichever is lower.
The special conditions applicable to this extension are:

These benefits are admissible only if the expenses are incurred in

hospital/nursing home as in patients in India.

A waiting period of 9 months is applicable for payment of any claim

relating to normal delivery or caesarean section or abdominal operation
for extra uterine pregnancy. The waiting period may be relaxed only in
case of delivery, miscarriage, or abortion induced by accident or other
medical emergency.
Page 28

Claim in respect of delivery for only first two children will be considered
in respect of any 1 insured person. Those insured persons who already
have 2 or more living children will not be eligible for this benefit.

Expenses incurred in connection with voluntary medical termination of

pregnancy during the first 12 weeks from the date of conception are not
covered.

Pre-natal and post-natal expenses are not covered unless admitted in

hospital/nursing home and treatment is taken there.

Details of insured person:

The insured is required to furnish a complete list of insured persons in

the prescribed format according to sum insured.

Any additions and deletions during the currency of the policy should be
intimated to the company in the same format. However such additions
and deletions will be incorporated in the policy from the first day of the
following month subject to pro-rata premium adjustment.

No change of sum insured for any insured person will be permitted

during the currency of the policy.

No refund of premium is allowed for deletion of insured person if he or

she has recovered a claim under the policy.

Page 29

3.1.3. Family Floater policy

For instance a person wants a health insurance for
himself, his spouse & their children; the Family Floater plan offers insurance
coverage to the entire family under one premium payment. Lets take an
example wherein the person insures himself, his spouse & the dependent
children with the individual insurance plans with a sum assured of Rs. 1 lakhs
each, he ends up paying premium ranging between Rs. 1000 - Rs. 2000 for
each family member. On the other hand if the person would have opted for
the family floater plan with the sum assured of Rs. 3 lakhs, the total premium
would surely be less than the separate premium payments in individual
health insurance plans. Moreover the separate health plan holds the cover of
only Rs. 1 lakh as against Rs. 3 lakh in case of the Floater plan thus helping
the family in case the medical treatment costs go beyond that.
What are the benefits of a Floater Plan?

A single policy takes care of your entire family

Single premium for the entire family.

The sum insured floats over the entire family.

One single policy covers the details of entire family.

Page 30

3.1.4. Unit Linked Health Plans:

Taking the route, health insurance companies too have
introduced Unit Linked Health Plans. Such plans combine health insurance
with investment and pay back an amount at the end of the insurance term.
The returns of course are dependent on market performance. These plans
are very new and still in development phase. This is only recommended for
people who can handle market linked products like ULIP and ULPP.
What are ULIPS?
ULIPS are investment cum insurance products, you
take insurance worth XYZ amount and then you pay some premium every
year. Out of your premiums some amount is cut as administrative expenses
(Premium allocation) and out of rest the mortality charges are cut for your
insurance and the rest is invested in market linked things.
Some points to note here are:

You decide the tenure of your Insurance and the insurance amount,
depending on which mortality charges are cut from your premium you
pay.

The Premium allocation charges are very high in initial years

(especially 1st year) and then reduce in later years. Thats the reason
one should be invested in ULIP for long period to get maximum benefit.

The money actually invested is invested as per your directions

ULIPS have different plans with different risk-return profile. One plan
may have allocation of 80-20 to equity and debt, some other can have
50-50 and some can have 20-80 and like this.

The investor can switch between the investment styles as and when he
wants (max 4 free switches in most of the cases, there after some
nominal fees).

ULIPS have sec 80C benefit; minimum of 3 premiums has to be paid.

ULIPS must be considered for long term investment products, so that

the high cost in initial years are averaged out over longer period.
Page 31

Advantages:

The switching over different styles is not costly, you are not charged
when you switch, which make them flexible.

ULIPS are innovative products and suits people who want long term
wealth creation with some insurance too.

Disadvantages:

They are not good product for people who require high cover and can
pay less cover, because premium depends on the cover. Higher the
cover, higher the premium. So these people must take term insurance
for their life insurance.

For people investing only for tax benefit must avoid them as they will
prove to be costly in short term because of there high allocation
charges.

Page 32

3.1.5. Jan Arogya Bima Policy

The coverage under the policy is along the lines of the individual
mediclaim policy except that cumulative bonus and medical check up
benefits are not included.

The policy is available to individuals and family members. The age limit
is 5 to 70 years. Children between the age 3 months and 5 years can
be covered provided one or both parents are covered concurrently.

The sum insured per insured person is restricted to Rs.5000/- and the
premium payable as per the following table.
Age of the person insured

Upto 46 years

46-55

56-65

66-70

Head of the family

70

100

120

140

Spouse

70

100

120

140

Dependent child upto 25 years

50

50

50

50

For family of 2+1 dependent

190

250

290

330

children

Premium upto Rs.10000/- qualifies for tax benefit under section 80D of the
income tax act. Service tax is not applicable to the policy.

Page 33

3.1.6. Cancer insurance

There are 2 cancer insurance schemes:
o

Indian cancer society

Cancer patients aid association (CPAA)

Cancer policy (Indian cancer society):

The insurance scheme came into effect from July, 1985
and is modified from 1st may, 1987 and is available to members of Indian
cancer society.
A proposal form and a membership form will have to
completed by each proposer/member.The policy will come into operation only
after a period of 1 month from the date of enrollment of the member, which
date is also the date of commencement of the insurance.
The policy is valid for 12 months and each insured
member has to pay the annual subscription of the society before its expiry.
However, the renewal insurance will have no waiting period.
The policy covers the insured member and his/her
spouse. During the operation of this insurance, if the insured member or
spouse contracts cancer then the company will pay to the insured, the cost of
diagnosis, biopsy, surgery, chemotherapy, radiotherapy, hospitalization and
rehabilitation to the extent of Rs. 500000/-. For each claim free renewal
(without break) 5% cumulative bonus would be allowed, subject to maximum
of 50%.
Reimbursement of claims is made (on quarterly basis)
on production of medical/hospital bills until the entire sum of Rs. 50000/- (and
cumulative member or his spouse is declared cured, whichever is earlier. The
cancer policy can be extended to cover 2 dependent children on payment of
Rs. 50% per child. The indemnity limit is Rs. 50000/- per child with
cumulative bonus applicable to each child. Claim by one insured child does
not affect liability under the policy in respect of the other child. The policy will
Page 34

not cease to be effective if there is a claim by one of the children. The policy
covers only allopathic mode of treatment. It is possible to grant a policy on
group basis. The employer has to arrange for a well-wisher corporate
membership. A group discount would apply on membership fee as well as
premium amount.
Cancer policy (CPAA):
This policy is granted to members of the cancer patients
aid association (CPAA). The insured by virtue of being a member of the
CPAA has to submit a proposal from with a declaration that he is in good
health and is not suffering from cancer. He has to undergo a medical checkup and a certification to that effect has to be made by CPAA of the proposal
form. The proposal form and the certification form part of the contract of
insurance. The premium shall be paid by the insured to CPAA as part of the
membership fee and this also applies as a condition precedent to the renewal
of the policy.
(NOTE: group policies are also available with discount in the premium as in
the case of group mediclaim policies)
Coverage:
If the insured during the currency of the policy suffers
from cancer, the policy will pay to the insured medical/ surgical/
hospitalization/ diagnostic expenses actually and necessarily incurred but not
exceeding the sum insured. Only allopathic mode of treatment is covered.
The sum insured is increased by 5% in respect of each completed year
during which the policy shall have been in force prior to the claim but the
maximum increase is restricted to 50% of the sum insured. This cumulative
bonus is lost if the policy is not renewed which 30 days after its expiry.
Exclusions

No claim is payable

If the insured contracts cancer within a period of 30 days from the date
of becoming a member of the CPAA
Page 35

Unless the diagnostic investigation reveals positive presence of cancer.

By reason of the contact of the insured with radiation or radioactivity

from any source other than diagnostic or therapeutic source.

If the insured ceases to be a member of the CPAA.

Claim procedure:

Notice of claim shall be served upon the insurers within 30 days of the
happening of any event which gives rise to a claim.

The claim shall be substantiated with supporting documents within a

reasonable period, duly certified by the CPAA.

Claim for reimbursement of medical expense may be submitted on

quarterly basis.

Differences as to the claim or quantum thereof are to be referred to the

committee set up by CPAA and new India.

If the company disclaims liability or there is dispute as to the quantum

payable and if such questions are not referred to the committee within
3 months thereafter the claim is deemed to have abandoned.

Page 36

3.1.7. Bhavishya Arogya policy

This is a deferred mediclaim policy and may be taken at
any age from 25 years onwards up to 55years. The retirement age to be
selected by the insured at the time of taking the policy may be between 55
and 60 years. The amount of maximum total benefit available under the basic
policy will be Rs.50000/- during the lifetime of the insured commencing from,
the policy retirement age and shall not exceed Rs.20000/- per any one illness
or injury. The coverage under the policy is, more or less, the same as under
mediclaim policy with the following differences:

Pre and post hospitalization are not covered under the policy.

The following exclusions of the mediclaim policy do not appear in the

policy:
30 days waiting period
1st year exclusions
Pre-existing diseases
Circumcision, pregnancy etc.
Policy retirement age means the age selected by the

insured at the time of signing the proposal and specified in the schedule for
the purpose of commencement of benefit in the policy. The policy retirement
age cannot be advanced due to any cause during the pre-retirement period.
Pre-retirement period means the period commencing from the date of
acceptance of the proposal and ending with the policy retirement age
specified in the schedule during which the insured shall be paying
installment/single premium deposit as applicable. The scheme provides for
payment of insurance premium in easy annual installment commencing from
any selected date between 25 years and 55 years and ending with the
attainment of selected age of retirement i.e. between 55years and 60 years.
The scheme allows a suitable refund of premium already paid in the event of
premature death of the insured as per prescribed scale. In case of voluntary
withdrawals from scheme refund is allowed to the extent of 75% of the refund
payable on death. After commencement of risk at policy retirement age there
is, provision for refund at appropriate scale, in case of death provided no
Page 37

claim is preferred. Similarly in case of voluntary withdrawals from the scheme

refund is allowed to extent of 75% of refund payable on death, provided no
claim is prefer
Special / Extra benefits:
The insured can increase the amount of benefit anytime
prior to 4years of retirement age specified in the policy by additional units of
Rs.10000/-each. Premium payable for such unit shall be at the rates of 20%
of the basic premium applicable for the relevant age at which such additional
units opted for.

No pre insurance medical examination is required

Advancement / postponement of retirement age is not permissible

The scheme provides for assignment

Premium upto Rs.10000/- per year will be eligible for exemption under
income tax act 80D.

Page 38

3.1.8. STAR TRUE VALUE HEALTH INSURANCE POLICY -

Royal Sundaram General Insurance Company Limited

Star True Value Health Insurance is designed to offer
health insurance to the masses. It is one of the cheapest health insurance
available in the market. The premiums are very economical, making it within
the reach of many. Star True Value is available in various options ranging
from a minimum sum assured of Rs. 30,000 to a maximum of Rs. 80,000.
However, the premium would depend on the age of the person proposed for
the insurance.
True Value Benefits:
Hospitalization Cover: This would cover the insured person for in-patient
hospitalization expenses provided the insured person is hospitalized for a
minimum of 24 hours. These expenses include room rent and boarding
expenses up to a maximum of 2% of the sum insured per day

Nursing expenses

Surgeon's fees, Consultant's fees, Anesthetist fees.

Cost of blood, oxygen, operation theatre charges, diagnostic expenses,

cost of pace makers.

Cost of medicines and drugs.

However, for Cataract surgery the cover is limited to Rs.20,000/-

Special Feature:

Cumulative Bonus ranging from 5% for every claim free year of

insurance up to 10 claim free years of continuous insurance.

Can members of a family be covered under a single policy?

Yes. Family would mean the proposer, spouse & dependent children
up to 25 years of age and dependent parents.

Page 39

A discount of 10% on the premium is available if 2 persons are covered

and 15% discount on the premium is available if more than 2 persons
are covered.
Premium Table

Sum Insured (in 5 ms

26 yrs

36 yrs - 46 yrs

Rs)

25 yrs

35 yrs

45 yrs

55 yrs

30000

340

375

475

40000

400

450

525

60000

550

620

700

1275

70000

600

710

900

1515

80000

660

850

1005

1800

Premium in INR (Excluding Service Tax) Group policy is not admissible under
this plan. Group policy is not admissible under this plan.

Claim Procedure:

Call the Star Health 24 hour help-line to register the details of

hospitalization.

Kindly mention your Star Health ID number for easy access to your
policy details.

In case of a planned hospitalization, please register 24 hours prior to

admission to the hospital

In case of emergency hospitalization, please register within 24 hours of

hospitalization

In all network hospitals, the cashless facility on payments can be

availed
Page 40

For treatment in non-network hospitals, payments must be made upfront to the hospital. Reimbursement of the expenses will be effected
by Star Health, on submission of the necessary documents.

Exclusions:

All expenses incurred in connection with treatment of any illness/

disease/ condition, which is pre-existing at the time of commencement
of insurance.

Treatment of illness/ disease/ sickness contracted by the Insured

Person during the first 30 days from the commencement of the policy.

Expenses incurred in the first two years of continuous operation of

insurance

cover

on

treatment

Cataract,

Hysterectomy,

for

Menorrhagia or Fibromioma, Knee replacement surgery (other than

caused by an accident), Joint replacement surgery (other than caused
by an accident),Prolapsed Inter-vertebral Disc (other than caused by
an accident),Varicose veins / ulcers.

Expenses incurred during the first year of operation of the insurance on

treatment of diseases such as Benign prostate, Hypertrophy, Hernia,
Hydrocele, Fistula in anus, Piles, Sinusitis and related disorders, Gall
Stone / Renal Stone removal.

Naturopathy treatment

Expenses, which are purely diagnostic in nature with no positive

existence of any disease.

Expenses incurred for treatment of disease/illness/accidental injuries

by systems of medicines other than allopathic.

Expenses

incurred

for

treatment

of

congenital

diseases/defect/anomalies.

Page 41

Eligibility:

Any person aged between 5 months and 55 (age at entry) years can
take this insurance.

Benefits of availing this policy:

24 hour Help-line.

Health Tips through Company's web enabled services.

Free General Physician advice.

Cashless facility if the treatment is availed at any of the Network

Hospitals.

Advantages:

Cashless hospitalization facility at over more than 4000 network

hospitals across India.

Attractive family discount on premium amount ranging from 10% to

15%.

Cumulative bonus ranging from 5% to 25% for every claim free year
renewal.

Tax benefit on premium paid (cheque or credit) under section 80C of

the Income Tax Act, 1961.

Page 42

3.1.9. Travel insurance policy

The Easy Travel Insurance Plan from Apollo Munich
Health is a short-term travel insurance plan that aims to make your and your
familys travel safe and hassle free. It guards you against illnesses, thefts and
other unexpected occurrences that can impact your plans while you travel. It
covers you and your family members (including spouse, dependent parents
and children) and offers you benefits, such as emergency cash, family
transportation, transport of imported medicines, doctor referrals, etc. In
addition to this, you have access to latest travel and health-related
information.
This policy is available in four variants which are tailormade to cover a wide range of travel emergencies. So now you have
freedom to pick what suits you the best and enjoy comprehensive travelrelated benefits.
You can access the following services:

Medical advice on telephone 24x7, while travelling

Referrals of medical service providers and hospitals

Reimbursement of medical expenses incurred during hospitalization

where ever possible

Lost of luggage assistance

Lost passport assistance

Embassy and interpreter referral services and much more

No medical tests required upto 70 years of age and much more for a
trip of duration not more than 180 days.

Page 43

3.2 DIFFERENT TYPES OF SCHEMES IN INDIA :

3.2.1 Employee State Insurance (ESI) Scheme:
Under the ES I Act, 1948 ES I Scheme provides
protection to employees against loss of wages due to inability to work due to
sickness, maternity, disability and death due to employment injury. It also
provides medical care to employees and their family members without fee for
service. When implemented for the first time in India at two centers namely
Delhi and Kanpur simultaneously in February 1952, it covered about 1.2 lakh
employees. Presently the scheme is spread over 22 states and Union
territories across India covering 91lakh employees and more than 350 lakh
beneficiaries.
The Act compulsorily covers:

All power using non- seasonal factories employing 10 or more per

sons;

All non-power using factories employing 20 or more employees and

Service establishments like shops, hotels restaurants, cinema, and

road transport and news paper s are covered. ESIC is a corporate
semi- government body headed by Union Minister of Labor as
Chairman and the Director General as chief executive.

Its members are representatives of central and state governments,

employers, employees, medical profession and parliament. The
financing of the scheme is done by Employees State Insurance
Corporation (ESIC)

This is made up of contributions from:

Employees who contribute at the rate 1.75 percent of their wages (if
daily wage is Rs.25 or less, his contribution is waived);

Employers who contribute at the rate of 4. 75 per cent of total wage

bills of their employees to contribution on behalf and for employees
having daily wage Of Rs. 25 or less; and
Page 44

State Governments contribute 12.5 per cent of total shareable

expenditure worked out by prescribed ceiling on expenditure which is
Rs. 600 per insured
The State Government runs the medical services of

this scheme of social insurance meant for employees covered under the ESI
Act 1948. This scheme - compulsory and contributory in nature - provide
uniform package of medical and cash benefits to insured persons is
implemented through special ESI hospitals and diagnostic centers,
dispensaries and panel doctors. The deliver y of medical care is through
service (direct) s stemmed and/or panel (indirect) system. It provides
allopathic medical care, but medical care by other systems like ayurvedic and
homeopathy in the states is also provided as per the state government
decision. The medical care consists of preventive, promotive, curative and
rehabilitative types of services are provided by the scheme through its own
network or through arrangements with reputed government or private
institutions by concept of proper referral system and regionalization.
Health Insurance for the aged:
Till a few years back, health insurance companies
were reluctant to provide cover for the aged. But nowadays there are a lot of
insurance companies providing policies for the senior citizens. Insurance
cover paid for a person of age 65 years and above, can provide additional tax
exemption of up to Rs.20,000. But keep in mind that the premium rates are
higher for senior citizens. For the employed, another option is to approach
the employer to negotiate with the official insurer to provide an option for
additional cover to parents. Since the volumes are high, the insurer can
provide such added cover at attractive premium rates.

Page 45

Existing infrastructure under ESIS in India

Particulars
No. of Centers

Units
632

No. of Insured Persons/Family Units

ESI Hospitals

84,45,000
125

Number of ESI Hospital Beds

23,334

ESI Dispensaries

1,443

Insurance Medical Officers

6,220

Insurance Medical Practitioners

2,900

Employment and study policy:

The policy is designed for Indian citizens temporarily
posted abroad in a sedentary non-manual work or students prosecuting
studies or engaging in research activities abroad.
The salient features of the scheme are:

Age limit : 18to 60 years

Limit of liability: U.S. $ 75000/-any one insured person and in all any
one period of insurance.

Deductible

Page 46

3.2.2 Central Government Health Scheme (CGHS):

Since 1954, all employees of the Central Government
(present

and

retired);

some

autonomous

and

semi-

government

organizations, MPs, judges, freedom fighters and journalists are covered

under the Central Government Health Scheme (CGHS). This scheme was
designed

to

replace

the

cumbersome

and

expensive

system

of

reimbursements (GOI, 1994). It aims at providing comprehensive medical

care to the Central Government employees and the benefits offered include
all outpatient facilities, and preventive and promotive care in dispensaries.
Inpatient facilities in government hospitals and approved private hospitals are
also covered. This scheme is mainly funded through Central Government
funds, with premiums ranging from Rs 15 to Rs 150 per month based on
salary scales. The coverage of this scheme has grown substantially with
provision for the non-allopathic systems of medicine as well as for allopathic.
Beneficiaries at this moment are around 432 000, spread across 22 cities.
The CGHS has been criticized from the point of view of quality and
accessibility. Subscribers have complained of high out-of- pocket expenses
due to slow reimbursement and incomplete coverage for private health care
(as only 80% of cost is reimbursed if referral is made to private facility when
such facilities are not available with the CGHS).

NGOS / Community-Based Health Insurance

Community- based funds refer to schemes where
members prepay a set amount each year for specified services. The premium
are usually flat rate (not income-related) and therefore not progressive.
Making profit is not the purpose of these funds, but rather improving access to
services. Often there is a problem with adverse selection because of a large
number of high-risk members, since premiums are not based on assessment
of individual risk status. Exemptions may be adopted as a means of assisting
the poor, but this will also have adverse effect on the ability of the insurance
fund to meet the cost of benefits.

Page 47

Community- based schemes are typically targeted at

poorer populations living in communities, in which they are involved in
defining contribution level and collecting mechanisms, defining the content of
the benefit package, and / or allocating the schemes, financial resources
(Such schemes are generally run by trust hospitals or non-governmental
organizations (NGOs). The benefits offered are mainly in terms of preventive
care, though ambulatory and in- patient care is also covered. Such schemes
tend to be financed through patient collection, government grants and
donations. Increasingly in India, CBHI schemes are negotiating with the for
profit insurers for the purchase of custom designed group insurance policies.
However, the coverage of such schemes is low, covering about 30-50 million
indicates that many community- based insurance schemes suffer from poor
design and management, fail to include the poorest- of-the poor, have low
members hip and require extensive financial support. Community based
health insurance (CBHI) schemes offered by Self-Employed Women's
Association (SEWA), Gujarat, Tribhuvandas Foundation (TF), Anand, or The
Mallur Milk Cooperative in Karnataka come under non-progressive funds with
flat rate premia. The schemes are launched to improve the access of health
services, rather than making profit.

Health Insurance Initiatives by State Governments:

In the recent past, various state governments have
begun health insurance initiatives. For instance, the Andhra Pradesh
government is implementing the Aarogya Raksha Scheme since 2000, with a
view to increase the utilization of permanent methods of family planning by
covering the health risks of the acceptors. All people living below the poverty
line and those who accept permanent methods of family planning are eligible
to be covered under this scheme. The benefits to be availed of, include
hospitalization costs up to Rs. 4000 per year for the acceptor and for his / her
two children for a total period of five years from date of the family planning

Page 48

operation. The coverage is for common illnesses and accident insurance

benefits are also offered.
This scheme can be availed by all permanent
residents of Goa with an income below Rs 50 000 per annum for
hospitalization care, which is not available within the government system. The
non-availability of services requires certification from the hospital Dean or
Director Health Services. The overall limit is Rs 30000 for the insured person
for a period of one year.
The aim of the project was to develop and test a
model of community health financing suited for rural community, thereby
increasing the access to medical care of the poor. The beneficiaries include
the entire population of these blocks. The premium is Rs 30 per person per
year, with the Government of Karnataka subsidizing the premium of those
below poverty line and those belonging to Scheduled Castes/ Scheduled
Tribes. This premium entitles them to hospitalization coverage in the
government hospitals up to a maximum of Rs 2500 per year, including
hospitalization for common illnesses, ambulance charges, loss of wages at
Rs. 50 per day as well as drug expenses at Rs 50 per day. Reimbursements
are made to an insurance fund which has been set up by the NGO / P RI with
the support of UNDP.
The Government of Kerala is planning to launch a
pilot project of health insurance for the 30% families living below the poverty
line. Currently, negotiations are under way with the I RA to seek service tax
exemption. The proposed premium is Rs 250 plus 5% tax. The maximum
benefit per family would be Rs 20 000. The amount for the premium would be
recovered from the drug budget (Rs 100), the P RI (Rs 100) and from the
beneficiary (Rs 62.50) while the benefits available would include cover for
hospitalization, deliveries involving surgical procedures (either to the mother
or the newborn). Instead of payment by the beneficiary, Smart Card facility
would be offered. This scheme would be applicable in 216 government
hospitals.

Page 49

CHAPTER 4
HEALTH INSURANCE
PREMIUMS & CLAIMS
SETTLEMENT
PROCESS

Page 50

4.1 TAX EXEMPTION FROM HEALTH INSURANCE PREMIUMS

Sec 80D covers Health Insurance. You can get exemptions of

Upto Rs. 15,000 paid for self + spouse + children.

Upto Rs 15,000 paid for Parents (Rs 20,000 if parents are senior
citizens)

So in total if you pay your health insurance and your parents health
Insurance premium, you can save upto maximum of 35,000.

Health Insurance Claims settlement process

A bit on how health insurance claims processing
works. In most cases, the Insurance companies appoint a third part
administrator (TPA) for claims processing. That means once the health
insurance policy is sold, the insurer passes on the baton to the TPA. In case
of a claim, the insured has to get in touch with the TPA for all versification
and formalities.
There are 2 ways by which health insurance claims are settled:

Cashless: For availing cashless treatment (only at authorized network

hospitals), the TPA has to be notified in advance (for planned
hospitalization) or within the stipulated time limits (for emergencies).
The insurance desk at hospitals usually helps with all paper work. The
claim amount need to be approved by the TPA, and the hospital settles
the amount with the TPA/ Insurer. Typically there will be exclusions and
such amount will have to be settled directly at the hospital.

Reimbursement: Reimbursement facility can be availed at both the

network and non-network hospitals. Here the insured avails the
treatment and settles the hospital bills directly at the hospital. The
insured can claim reimbursement for hospitalization by submitting
relevant bills/ documents for the claimed amount to the TPA.
The TPA mode of claims settling has its own

problems. The TPA is incentivized to limit insurance claims and they are not
Page 51

the ones who sells the policy. There are many cases where the insured had
a tough time to claim for his hospital expenses. So before taking health
insurance it would be useful to check who the TPA is and how good are they
when it comes to claims processing. Internet search and a friendly chat with
the hospital staff can give you good insight on the insurer/ TPA. There are
also some health insurance providers who do not employ TPAs and does
claims settlement directly (this is called In-house TPA).
Saving on Health Insurance Premiums:

Nobody likes paying more than its worth. Getting the most appropriate
and affordable Health insurance is dependent on a few aspects like
your choices, capability to choose and of courses the health conditions
of the policy buyer. But by following a few steps you can save a good
lot on your health insurance premium.

Smokers health is always at risk, so people with smoking habits will

end up paying more premium than a non smoker. So in order to reduce
the premium, one has to quit smoking.

High blood pressure is not a good sign and is advisable to keep it

under control. Keeping control on high blood pressure can help you
reduce the premium cost.

If you are in good health, then automatically your premium cost will be
lower than the people whose have health problems.

Comparing the quotes from various insurers is an important aspect to

save on health insurance premium. Though you need to shop for a
while to have an idea. Make sure you get some affordable online health
insurance quotes.

Compare the benefits of various health insurance plans. Perform deep

research to find out what discounts you can avail for in various
appropriate policies.

Make your choices for cover very carefully; take only the coverage you
require. Your random selection might end you up paying out more than
actually required. So a right decision making is important.

Page 52

4.2 How to file a health insurance claim:

Taking health insurance and paying premium is one story and filing for
claim is another. Claiming benefits can be quiet tricky at times so you
have to be smart and careful while filing for the claim. To file a Health
Insurance claim with your Insurance Company one has to keep the
following things in mind.

Claim form duly filled and signed by the claimant.

Discharge Certificate from the hospital

All documents pertaining to the illness starting from the date it was first
detected i.e. Doctor's consultation reports/history

Bills, Receipts, Cash Memos from hospital supported by proper

prescription.

Receipt and diagnostic test report supported by a note from the

attending medical practitioner/surgeon justifying such diagnostics.

Attending doctors certificate stating the nature of the operation

performed, bill and receipt. Attending consultant's / specialist's /
anaesthetists bill and receipt, and certificate regarding diagnosis.

Certificate from the attending medical practitioner / surgeon that the

patient is fully cured.

Details of previous policies if the details are not already with TPA
except in the case of accidents.

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CHAPTER 5
FUTURE OF
HEALTH
INSURANCE

Page 54

FUTURE OF HEALTH INSURANCE:

Given the situation, there are few issues of concern
or barriers towards implementing a social health insurance scheme in India.
These are enumerated below along with the possible way ahead. India is a
low-income country with 26% population living below the poverty line, and
35% illiterate population with skewed health risks. Insurance is limited to only
a small proportion of people in the organized sector covering less than 10% of
the total population. Currently, there no mechanism or infrastructure for
collecting

mandatory premium among the large informal sector. Even in

terms of the existing schemes, there is insufficient and inadequate information

about the various schemes. Data gaps also prevail. Much of the focus of the
existing schemes is on hospital expenses.
5.1 Managed health care:
This is a new and innovative concept in health
insurance. Broadly speaking, it refers to provision of total and integrated
claims service, through what are known as Third Party Administrators, to
health insurance policyholders.
The services made available include:

Wide network of hospitals/nursing homes all over India where a policy

holder can avail of cashless services.

Cashless services mean admission to network hospitals without

admission fees or deposits and payment of covered expenses at the
time of discharge. Thus, there is no need for follow-ups for
reimbursement by patient or relative.

Medical transportation

Personalized care and service.

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Future Change Expected:

At present when the Health Insurance market is
growing there are large numbers of proposals under consideration with IRDA,
Insurance Companies, Government Agencies & Corporate bodies. According
to newspaper reports some of these are:

Licenses are now being issued to Health Insurance companies by

IRDA. Star Health was the first health insurance co. which has become
operational in early 2006. Apollo DKV started operations in Aus 2007.
Max, Fortis, Dr Reddy Lab has plans to enter this business.

In view of increase in medication costs the sum assured limit of Rs 5,

00,000 has been increased to Rs. 10, 00,000. New India is working
proposal to increase the sum assured limit to Rs 25, 00,000. This is a
welcome step.

In view of high claims ratio should there be limit on amount payable on

specific disease or treatment. According to recent news item, which
appeared in newspaper on June29, 2005 the proposal is to limit it at
Rs. 1, 62, 000 for heart ailment. Customers have reacted unfavorably
to this news item.

This will be major deterrent to customers to go in for Health Insurance

of Rs. 5, 00, 000 or Say Rs.10, 00, 000. This proposal is contradictory
to point 2. General opinion emerging is that if this is done then many
customers will reduce their coverage from Rs. 5, 00,000 to Rs. 2,
00,000.

Insurance companies are becoming restrictive in issue of health insurance

policies and are considering:

Minimum sum assured of Rs. 1 lakh.

Maximum age at entry of 50 years or so. Those having policies in force

will however go on getting renewal of policies. There is a proposal of

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introducing concept of loading for senior citizens who are above 60

years.

Insurance premium may increase by 100% in near future say in 2008

due to Prime Minister's announcement of Rs 2000 Crores health
insurance plan for poor.

Hospitals / Pharma Co's may become promoters / investors in health

insurance companies. It may result in better healthcare management
as resources can be effectively utilized for the welfare of the society.
Some projections are indicating that by 2010 Health Insurance
premium will touch Rs. 25000 crores.

Stricter norms will be introduced for TPA's. Concept of Co pays to get

strengthened so that senior citizens have no problem in getting
insured.
Each family gets a smart card! The smart card

entitles its bearer to a list of pre-specified in-patient services in the second

month following enrollment. So, for example, someone enrolled in the month
of February can use the card at designated hospitals as of April 1st of the
same year through March 31st. (Provisions exist for pro-rata premium
payments to the insurance company in the event of partial year enrolment
subject to a minimum of six months.)
The transaction process begins when the member
visits the participating hospital and his or her card is swiped. If a diagnosis
leads to a procedure, the appropriate prescribed package is selected in the
software menu. Upon release, the card is again swiped and the pre-specified
cost of the procedure is deducted from the 30,000 rupee total on the card. A
receipt is printed and provided to the member. Initiating stand alone health
insurance companies is a recent development in India, which is expected to
boost the penetration of health insurance (HI) in the country. Currently less
than 1% of the population is covered under commercial health insurance in
comparison to almost 60-65 % in developed countries. It is expected that with
greater penetration of HI, the access to health care will also increase. Lack of
credible data and expertise in Health Insurance is expected to be fulfilled by
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such a development. Recommendations of the subcommittee at IRDA on

Stand Alone Health Insurance companies has also recommended lowering of
capital requirements from Rs. 100 crores to Rs. 50 crores, as well as
increasing Foreign Direct Investment over the existing 26% cap.

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5.2 LIC CHILD FUTURE PLAN:

LIC Child Future plan is one of the plans that is
designed specifically in order to meet the educational, marriage expense, and
other important needs of the growing children.
What is the risk cover that comes along with this policy?

It gives a risk cover on the life of the child during the term of LIC Child
Future plan as well as during the extended term which includes 7 years
after the expiry of the term of policy. On survival of the life of the
assured child, a number of survival benefits are provided to the child
upto the end of the specified durations.

A lot of options are provided to choose in case of Sum assured,

maturity age, term of policy, mode of paying the premium amount, and
premium waiver benefit. The premium amount can be paid at the
intervals of either yearly or half-yearly or quarterly or by means of the
salary deductions during the entire term of policy. Before the policy
term period, the premiums can be paid for either six years or five years.

What are the benefits provided in this policy?

The benefits that are provided under this LIC Child Future plan are

Survival benefit,

Death Benefit,

Auto cover

Premium waiver benefit.

Under the survival benefit, about 25% of the assured sum will be paid 5
years before the date of expiry of policy term and about 10% of the
assured sum will be paid 4, 3, 2, 1 year before the date of expiry of the
term of policy.

And on the date of expiry of the term of LIC Child Future plan, about
50% of the assured term will be paid along with vested and

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reversionary bonus and final or additional bonus will also be given if

any.
The Future Care Plan is a pure term assurance plan.
This plan renders high protection at low premium rates. It gives attractive
options of convertibility to an endowment plan.
The eligibility criteria of Future Care Plan are as follows:

The minimum entry age for the policy is 18 years.

The maximum entry age for the policy is 60 years.

The policy term available is 5 to 25 years.

The minimum sum assured under this policy is Rs 300000/-.

No limit is there for maximum sum assured.

The premium paying modes in this plan are yearly, half yearly and
monthly. The monthly mode is available for ECS only.

The minimum premium installment is Rs 1500/- per annum.

The key features of Future Care Plan are as follows:

This plan is considered to be the simplest form of insurance for a

specific period of time.

This plan provides the maximum protection as an insurance plan for

the premium amount.

Within a particular period of the policy the term plan can be changed
into an endowment life insurance plan.

The premiums charged for the permanent plan will depend on the age
of the insured without providing any further evidence of insurability.

This plan also provides for the payment of the death benefit to the
beneficiary of the policy holder during the policy term.

There is no maturity benefit available under this policy.

The policy holder has the option to customize the policy by opting for
the available riders such as; Accidental Death Rider (AD) and
accelerated Critical Illness Extended Rider (ACI).

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Case studies
Family Floater Plan
The Gola family, comprising of Mr. Avinash Gola, Mrs.
Kavita Gola and their child, had opted for ICICI Lombards family floater
health plan for a cover of Rs.2, 00,000.
A floater plan meant that in case of a medical
emergency, the cover of Rs 2, 00,000 would be spread across all the three
family members. On 17 May, 2005, Mrs. Kavita Gola complained of infection.
Mr.

Gola

immediately

contacted

our

TPA

helpline

and

obtained

preauthorization approval for admitting Mrs. Gola into a network hospital.

Mrs. Gola was admitted to the hospital for two days for. Perianal abscess
removal the total cost of treatment amounted to Rs 8,240 comprising of
room/nursing expenses Rs 2100, pathology Rs 260, operation theatre
Rs 4120, pharmacy 1260 and consultancy charges Rs 500. The claim
was processed for Rs 8000. The Gola family sailed through the crisis with the
help of ICICI Lombards health insurance floater plan. Moreover, the entire
family was still covered under the plan for any future medical contingency.
Individual health insurance plan:
Mr. P R Arunagiri, who had bought our Individual
health insurance plan for Rs 2, 00,000 cover, suffered fracture in an accident.
He

being

aware

about

cashless

hospitalization

procedure immediately contacted our TPA helpline and got pre-authorization

approval for availing cashless facility. He was hospitalized for two days and
incurred a total cost of Rs 8990. However, ICICI Lombard health insurance
plan came to Mr. Arunagiris rescue. His entire expenses -- Rs 1875
(nursing), Rs 445 (x-ray), Rs 350(operation theatre), Rs 570 (pharmacy) and
Rs 5750 (surgeons fee/ consultancy charges) were put up for claim. Out of
Rs 8990, the claim was processed for the final amount of Rs 8961, which
was directly borne by the company.

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CHAPTER 6
CONCLUSION

Page 62

CONCLUSION
Health Insurance may be the most important type of
insurance you can own. Without proper health insurance, an illness or
accident can wipe you out financially and put you and your family in debt for
years. So what is health insurance and how does it work?
Health insurance is a type of insurance that pays for
medical expenses in exchange for premiums. The way it works is that you pay
your monthly or annual premium and the insurance policy contracts
healthcare providers and hospitals to provide benefits to its members at a
discounted rate. This is how hospitals and healthcare providers get listed in
your insurance provider booklet. They have agreed to provide you with
healthcare at the specified cost. These costs include medical exams, drugs
and treatments referred to as "covered services" in your insurance policy.
Health insurance is a type of insurance that pays for
medical expenses in exchange for premiums. The way it works is that you pay
your monthly or annual premium and the insurance policy contracts
healthcare providers and hospitals to provide benefits to its members at a
discounted rate.

Page 63

BIBLIOGRAPHY
WEBSITES:

a. www.licgov.in
b. www.moneycontrol.com
c. www.kotakmahindra.in
d. www.hdfc.com
e. www.licindia.in
f. www.bajaallianz.com
g. www.icicprudential.com
h. www.wikipedia.com
i. www.google.com

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