INSURANCE AND RISK

MANAGEMENT
Topic of project
IMPORTANCE OF HEALTH INSURANCE

Submitted by:
Himanshu Singh
Roll no. BMS/20/60
B.M.S. IV semester

To:
Dr. Aanchal Gupta
Department of Commerce

ARYABHATTA COLLEGE
UNIVERSITY OF DELHI
 DECLERATION

I, student’s name, student of Bachelor of Management Studies (4th

semester), in Aryabhatta College, University of Delhi, hereby declare

that I Have made this academic project titled ‘Health Insurance’ as a

part of the internal assessment for the subject ‘Insurance and Risk

Management’, for academic year 2021-22. The project is submitted for

the first time and here only and the information submitted therein is

true to the best of my knowledge. I sincerely thank Dr. Aanchal Gupta

and my friends for the extended help by them for the successful

completion of the project report.

Date: 08-04-2022

Name – Himanshu Singh

 INDEX
S.no TOPIC Pg.
No.
1.) Health Insurance (Introduction) 1

2.) Evolution of health insurance in India 2-3

3.) What is a Claim? 3

4.) Typed of Health Insurance 4-5

i) INDEMNITY PLANS
ii) DEFINITE BENEFITS PLAN
5.) Advantages of Health Insurance 6-11

6.) Disadvantages of Health Insurance 12-13

7.) Digit insurance company 13-14

8.) What’s great about a health insurance by digit? 14-18

9.) Key benefits of Health Insurance by Digit 19-21

10.) Bibliography/References 22
 HEALTH INSURANCE

INTRODUCTION

Health insurance is a contract that requires an insurer to pay some or all of a person's healthcare

costs in exchange for a premium. More specifically, health insurance typically pays for

medical, surgical, prescription drug, and sometimes dental expenses incurred by the insured.

Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay

the care provider directly.

It is often included in employer benefit packages as a means of enticing quality employees,

with premiums partially covered by the employer but often also deducted from employee pay

checks. The cost of health insurance premiums is deductible to the payer, and the benefits

received are tax-free, with certain exceptions for S corporation employees.

Health insurance or medical insurance is a type of insurance that covers the whole or a part of

the risk of a person incurring medical expenses. As with other types of insurance is risk among

many individuals. By estimating the overall risk of health risk and health system expenses over

the risk pool, an insurer can develop a routine finance structure, such as a monthly premium or

payroll tax, to provide the money to pay for the health care benefits specified in the insurance

agreement. The benefit is administered by a central organization, such as a government agency,

private business, or not-for-profit entity.

 EVOLUTION OF HEALTH INSURANACE IN
INDIA

Experts from the healthcare industry will unanimously tell you that health insurance is the best
care for India’s healthcare problems and the recent surge in premium for health insurance
policies certainly conforms to that view. In spite of being a loss-making proposition for most
insurers, for an industry that is only a couple of decades old in India, there is certainly a lot of
optimism about its future prospects.

Though health insurance came to India in the form of Central Government Health Insurance
Scheme for government employees and the Employees State Insurance Scheme for employees
in the private sector - but it was only in 1986 that the first health insurance product was
launched in the country. Since then things have certainly changed and now along with the
government-sponsored general insurance companies, there are 20 private sector insurance
companies operating in India and offering their products.

In 1986 when 'Mediclaim' was first launched by the Indian government it offered minimum
and maximum health coverage of INR 15,000 and INR 5 Lakh respectively. Today the
minimum sum assured by the public sector insurance companies is INR 50,000 and INR 1 Lakh
for the private sector companies while 95% of the online health insurance policies the minimum
sum assured is INR 3 Lakh.

The cost of healthcare in India has grown at an exponential rate in the last decades or so, and
any medical procedure that costs around INR 10,000 during the 80s and 90s now cost more
than INR 50,000. Moreover, many treatment procedures like Angioplasty, MRI scan or CT
scan were not even known during that time. Introduction of new and advanced technology has
made the cost of medical procedures to soar, and with the arrival of the corporate hospitals,
they have actually increased multifold.

According to a report published by Marsh India medical inflation in India is currently pegged
at just over 18% and consumers those once bought policies with of INR 1 Lakh sum assured
are now willingly ready to pay premiums of INR 1 Lakh for policies that offer Rs 1 Crore as
sum assured.
In India, health insurance started only as a cover for individual citizens and their families and
then it offered reimbursement for hospital treatment only. There were also sub-limits and caps
on every single item covered by the policies. But as health care started to evolve the sub-limits
were removed during the 1990s and with an increasing number of private hospitals and
improved life expectancy more and more people started to buy health insurance policies.

Third party administrators were introduced by the Insurance Regulatory and Development
Authority (IRDA) in 2001, which acted as the link between the hospitals and the companies
and in turn allowed the insurance companies to offer cashless facilities on their products. The
advent of the service sector, especially the IT sector contributed to the growth of group
insurance and presently the number of health insurance in India has become more than double
of the number of policies sold in the year 2003-04.

WHAT IS A CLAIM?

So you’ve seen this word everywhere but not sure what it means exactly. To simply put it, a
claim is what you need to do when you want your health insurance company to pay for your
hospitalization expenses in case of a treatment.

Claims are usually to be informed about in advance for planned treatments and hospitalizations
whereas in case of medical emergencies the situation would be different, based on the type of
claim you’re going for. At Digit, there are primarily two types of health insurance claims you
can opt for.
 TYPES OF HEALTH INSURANCE

Health insurance encompasses two types - Indemnity plans and Definite Benefit Plan. The
indemnity plans are traditional health covers which cover hospitalization costs from the sum
assured. Definite benefit plans offer lump sum payment on detection of illness.

INDEMNITY PLANS
Indemnity-based health insurance policies generally pay for the actual hospitalization expenses
incurred during the treatment up to the policy sum insured limit. It means that the insurer will
pay you the treatment cost within the sum insured limit as offered under the policy. The
indemnity health policy can be a regular or comprehensive health insurance policy for
individuals, family and senior citizens.

As the name suggests, these plans function on the principle of indemnity i.e. in case of medical
expenses incurred by a policyholder, the insurance company will reimburse these expenses,
subject to a maximum sum insured limit.

These plans provide coverage for pre-hospitalisation expenses, in-patient treatment including
doctor’s fees, ICU, room charges, diagnostic tests, surgery, medicines, as well as post-
hospitalisation expenses and daycare treatment. These plans also cover the treatment cost for
covid-19 treatment. However, these plans come with a clause that requires hospitalisation of at
least 24 hours to be eligible for a claim.

Indemnity plans further include:

 Individual
 Family floater
 Senior Citizen
 Mediclaim
 Unit linked health plans
DEFINITE BENEFITS PLAN
A defined benefit policy, on the other hand, pays a stipulated sum on an insured event. Both
life and non-life companies can offer defined benefit plans.

Policies like hospital cash policy, major surgical benefit policy and critical illness policy are
defined benefit plans.

A critical illness policy is the most popular defined benefit plan. It pays the insurance cover—
or the sum assured—on diagnosis of an insured critical illness; it doesn’t matter what the
hospital bill is.

Most of these plans cover critical illnesses such as cancer, kidney failure, heart attack, major
organ transplant and stroke. But you need to keep in mind that typically these plans terminate
after the first claim and few plans that cover multiple critical illnesses, cap the benefit amount.
What you should also keep in mind is that critical illness plans come with a survival period
clause of a month. In other words, you need to survive for about 30 days after a critical illness
is diagnosed to make a claim.

Given that indemnity plans reimburse your hospitalisation costs, you need to buy them first.
Defined benefit plans need to be seen as income supplement plans and can be taken over and
above indemnity plans.

Definite benefit plans include the following:

 Critical Illness Plan
 Personal Accident plan
 Hospitalization cash benefit plan
 ADVANTAGES OF HEALTH INSURANCE

A Detailed Guide about the Benefits of Health Insurance in India

Did you know that the last health sample survey by the National Sample Survey Office in 2013-
14 showed that about 36 million households in India spent more on their healthcare than their
annual per capita consumption? (1)

Shocking, right?

That is why, nowadays, paying out of the pocket to avail competent healthcare services is not
a feasible option for most. Health insurance policies are the saving grace when it comes to
meeting the high cost of medical treatment and all other accompanying needs.

If you still have questions regarding why health insurance policies are a necessity, let us take a
look at a few relevant statistics.

Why do we Need Health Insurance Policies?

1.) The cost borne in India through universal healthcare is around Rs. 1,713 per person per

annum. Given that India has a population of above 130 billion, this is quite a sizeable

expenditure.

2.) About 65.06% of Indians spend total health care expenditure out of their pockets which

land them in a debt trap.

3.) Insufficient allocation of funds to the healthcare sector has pushed about 7% of the total

population below the poverty line. The government has not undertaken any active

measures to improve the situation.

Looking at these data, it is not difficult to make out that the situation surrounding affordable
healthcare is quite dire in the country.

As a result, health insurance policies are no longer just a convenience; they have become a
necessity to save yourself from huge financial losses.

The need for health insurance policies, as a result, has never been higher!

But, before you zero in on purchasing health insurance for yourself and your family, it is crucial
for you to familiarise yourself with the benefits you can avail from one.

If you are well-versed with the advantages you can avail from an insurance cover, you can
choose the one best suited for your requirements.

I have a compiled a list to summarise health insurance benefits one should look for before
purchasing a policy.

Take a look!

1. Hospitalization Expenses

One of the most significant benefits of health insurance policies in India is that they cover
hospitalization charges. Following are some of the aspects that health insurance policies cover
with regard to hospitalization:

A.) Accidental Hospitalization - Any cost incurred while seeking treatment in due
course of hospitalization due to accidents in covered under health insurance plans.

B.) Illness-Related Hospitalization - Insurance policies cover costs incurred while

seeking treatment in a hospital for any illness. You must note that the number of illnesses
covered can be wide and varied, including Chikungunya, Dengue, etc.
C.) ICU Room Rent - As its name suggests, ICU rooms are for those who need specialised
care for their treatment. As a result, the room rent for ICU is also significantly higher than
that of standard rooms. A health insurance policy covers the charges for the ICU rooms
alongside normal rooms.

D.) No Cap on Room Rent – Well, this is a feature that is offered by only some

insurance providers. Usually, standard health insurance policies come with a cap on
room rent charges, which deters them from availing a room that charges more than this rent
cap.

So there you go! You can finally breathe easy knowing that your health insurance
benefits will cover all the expenses that you incur during hospitalization and will allow
you to make your time at the hospital more comfortable with no cap on room rent.

2. Pre and Post Hospitalization Costs

It is not always necessary that you have to be hospitalised to incur huge medical expenses. Pre-
hospitalization costs for diagnostic tests as well as follow-up post-hospitalization costs can also
be quite substantial. A health insurance policy helps to cover such costs, as well.

You can choose to opt for a lump sum payout post your hospitalization, which will allow you
to cover all your expenses without the need to present any bill. Or, you can choose to avail the
standard benefits which will reimburse all your post-hospitalization charges.

3. Cost for Day-Care Procedures

A few procedures to treat illnesses might not require you to be admitted to a hospital but can
land you a sizeable bill, all the same. So, does the health insurance policy help then?
You can avail coverage for such day-care expenses. This includes the medical expenses that
you incur in a hospital while being there for less than 24 hours, due to advancement in the
medical field.

Few of the day-care procedures covered for treatments without hospitalization such as nasal
sinuses, cataract, chemosurgery, orthopaedics, etc.

4. Refill Sum Insured Amount

This feature of health insurance policies allows you to refill your sum insured amount if you
have exhausted the existing sum insured. Refill sum insured benefit is only available for an
unrelated illness.

This benefit is especially helpful if you have a family floater insurance cover, and your entire
family is sharing a single policy.

5. Tax Benefit

A large number of people in India end up purchasing health insurance just because of the tax
benefit it offers. While the tax benefit shouldn't be the reason why you invest in health
insurance, it still is a significant advantage. Under Section 80D of the IT Act, an individual
below 60 years can claim a tax deduction of up to Rs. 25,000 for the premiums paid against a
health insurance policy. If you are above 60 years, the deduction limit is up to Rs. 50,000.

If you have also purchased health insurance for your below 60 years parent/s, there is an
additional tax deduction of Rs. 25,000. In case if the age of your parent/s is above 60 years, the
deduction available is up to Rs. 50,000. So, if you are below 60 years and have purchased a
health policy for yourself, as well as, for your above 60 years parent/s, the total tax deduction
you can claim in a financial year is up to Rs. 75,000.
6. Cover your Daily Expenses with Hospital Cash Benefit

Hospitalization may lead you to be laid off from your job for a few days. In this scenario, you
may face a cash crunch, making you hesitant to spend on your daily needs. But with a daily
cash allowance from your health insurance policy, you can overcome this situation easily.

This amount has no usage restrictions, allowing you to manage your daily expenses for tea,
snacks, etc. for up to 30 days of hospitalization.

7. Get Your Transportation Costs Reimbursed with Ambulance Cover

Ambulance charges, especially if you are residing in metropolitan cities, can be quite high. For
instance, in Bangalore, it can range up to Rs. 5,000, with transport from outside the city being
even higher.

So, having a health insurance policy in place can help you cover the costs incurred during
transportation through an ambulance.

8. Get Increased Sum Insured as No Claim Bonus Benefit

You are probably wondering what happens to the premiums paid towards your health insurance
if you do not raise a claim during the policy period.

Well, fret not!

Insurance providers extend the benefit of No Claim Bonus in the form of an additional sum
insured amount at the same premium payment for the subsequent year. This No Claim Bonus
can range between 10% and 20%.

This makes for one of the most useful benefits of having health insurance.
9. Maintain Good Health with Complimentary Annual Health Check-Ups

Illnesses mostly occur unannounced. It is therefore pertinent to go for an all-round medical

check-up every once in a year to ensure that you are healthy and hearty.

And the good news? Your health insurance policy will cover the expenses for this medical
check-up, once in each year. This is a complimentary benefit that is extended by insurance
providers on the renewal of your policy.

10. Get Maternity & Infertility Treatment Benefit and Newborn Care Cover

This is an add-on benefit that can be availed by those who are planning to have a baby after 2
years from the date of availing the policy.

Cost of child delivery.

Cost of medically necessary pregnancy terminations.

Cost of treatment for the newborn baby for up to 90 days (if required).

Expenses incurred to treat infertility.

This cover is, thus, extremely useful if you want to reduce your financial liabilities while having
or planning to have a kid. This benefit comes with a waiting period of 2 years and covers up to
2 kids only.

So, there you go! Here are all the benefits of having a health insurance policy in India.

To make sure that you have availed the best of the insurance policies available, make sure you
look for the above benefits before opting for one!
 DISADVANTAGES OF HEALTH INSURANCE

One of the main disadvantages of having health insurance is the cost. Health insurance policy
can be very costly even for those that have a health insurance plan through their employers.

Costs may be so high that many end up struggling to make payments. This can be quite
challenging for those who have low incomes or are self-employed. Health care coverage for
families may cause an added financial burden.

Pre-Existing Exclusion:

Another disadvantage would involve people who have pre-existing diseases. They have to
undergo a waiting period which is typically four years. Insurers typically require you need to
wait for four years for any pre-existing illness to be covered.

This becomes a major obstacle for older individuals with pre-existing medical conditions. This
is particularly so because pre-existing illnesses don't only include illnesses you may have
received treatment for in the recent past. It includes illnesses for which there were signs or
symptoms in the 48 months prior to the payment of the first premium.

Waiting Period:

In the Waiting period you must wait for a specified amount of time before you make a claim.
But you cannot claim some or all benefits of the health insurance from your company. The
initial waiting period or 30 day waiting period is the time where the customer has to wait before
making a claim under the health insurance policy. Any accident-related claims are exempt from
this waiting period rule. This is also added to prevent people from taking health insurance only
at the time of illness.
Increase in Premiums:

The premiums of your Health insurance policy mostly depend upon your age. There can be a
significant difference in the premium amount when you purchase a health policy when you are
30 years old and when you buy one after crossing 50 years. The insurers get increased risk by
charging a higher premium. This is the reason why it is said that you should purchase health
insurance when you are young.

Co-Pay:

Co-pay is the way of making customers liable and participating in the claim settlement process.
Co-pay is the amount of claim which is to be borne by the insured customer at the time of claim
settlement. Most of the health insurance policies have a co-pay condition if there are senior
citizens included in the policy. Higher the co-pay amount selected by the customer lower would
be the health insurance premium.

DIGIT INSURANCE COMPANY

Digit Insurance is a Bangalore-based insurance company, established in 2016. The digital

insurance venture is backed by Fairfax Financial Holdings, Toronto – a publicly listed company
founded by Prem Watsa.

The company was founded by Kamesh Goyal – a veteran employee of Allianz Insurance. The
company began operations in May 2017, they received Insurance Regulatory and Development
Authority of India (IRDAI) approval only in September 2017. Digit currently offers insurance
for motor, travel, mobile, home, bicycle and jewellery.

Digit Insurance received an amount of $49 million (Rs 385 Cr) as the first round of funding
from Fairfax Holdings in 2017. In 2018, they have raised another $45 million (Rs 315 Cr) to
expand its footprint across the country to smaller towns and strengthen its tech platform.
 WHAT’S GREAT ABOUT A HEALTH
INSURANCE BY DIGIT?

Simple online processes - From the process of buying a health insurance policy to making
claims is paperless, easy, quick and hassle-free! No hard copies, even for claims!

Additional sum insured available – Get additional coverage specifically for Accidental
Hospitalizations and Critical Illnesses, at zero cost!

Covers pandemics like the coronavirus – India is one of worst affected countries when it
comes to the COVID-19. We cover the same as part of our health insurance so you needn’t
really get a separate coronavirus policy.

No age-based copayment - Our health insurance comes with no age-based copayment. This
means, during health insurance claims- you need not pay anything from your pocket.

No room rent restriction - Everyone has different preferences, and we understand that. That’s
why, we have no room rent restrictions. Choose any hospital room you prefer.

2X Sum Insured - If you exhaust your sum insured and unfortunately need it again during the
year, we refill it for you.

Cumulative Bonus - A reward for staying healthy! You can get yearly cumulative bonus for
claim-free years.

Get treated at any hospital - Choose from 6400+ of our network hospitals in India for cashless
treatment or opt for a reimbursement.

Health Insurance for the Young & the Restless

We understand that young people are a lot healthier and are often apprehensive to get a health
insurance so early in life. However, getting a health insurance whilst you’re young means you
will have cheaper premiums, cross waiting periods faster, can avail maternity benefits when
the time comes and even use our OPD cover for minor treatments and injuries that can happen
to just about anyone!

Health insurance for the Great Indian Families

When you want to be that guardian angel and not only protect yourself, but your lovely family
too. A health insurance for your family can be bought in the form of a family floater plan or an
individual health insurance plan for each family member. With our special benefits such as
refill sum insured, maternity benefit and newborn baby cover and more, our health insurance
is perfect for families both big and small.

Health Insurance for the Old & the Wise

Whether you’re looking to protect yourself or, your beautiful parents. Our health insurance for
senior citizens is dedicated to the senior population. With benefits such as AYUSH treatments,
home hospitalization, no room rent capping and hospitalization for coronavirus; our health
insurance understands exactly what our parents need.
What’s not covered?

Pre-Natal & Post-Natal Expenses

Pre-natal and post-natal medical expenses, unless it leads to hospitalization.

Pre-Existing Diseases

In case of a pre-existing disease, unless the waiting period is over, the claim for that disease or
illness cannot be made.

Hospitalization without Doctor’s Recommendation

Any condition you get hospitalized for, that doesn’t match with the doctor’s prescription is not
covered.

Cashless Claims

As the name suggests, cashless claims refer to claims where you don’t need to pay from your
pocket at the time of hospitalization. “But isn’t my health insurer supposed to pay anyway?”
you wonder. The answer to that is yes, of course.

However, there is also an option to go for reimbursement claims wherein you pay for your
treatment costs at the time of hospitalization, and later – within 20 to 30 days get the bills
reimbursed by your insurer.

However, when you opt for cashless claims you don’t need to do that as the hospital will
directly take care of the bills with your insurer. You can read more about this in detail here.
 Key benefits of Health Insurance by Digit

Co-payment

Cashless Hospitals

Cumulative Bonus

Sum Insured

Room Rent Capping

Claim Process
 (THE DISADVANTAGES OF HEALTHCARE INSURANCE ARE NEGLIGIBLE WHEN COMPARED TO THE ADVANTAGES
OFFERED BY HEALTHCARE INSURANCE POLICIES . T HE DISADVANTAGES CAN BE

OVERCOME BY THE PROPER UNDERSTANDING OF THE TERMS AND CONDITIONS MENTIONED IN THE POLICY

COPY.)

Bibliography/References

https://www.godigit.com/health-insurance (8 April 2022)

https://en.everybodywiki.com/Digit_Insurance (8 April 2022)

https://www.bankbazaar.com/insurance/health-insurance-companies-
india.html (8 April 2022)

https://www.policybazaar.com/health-insurance/health-insurance-india/
(8 April 2022)