Page 51 - Insurance Times December 2023

Deductible can add to benefits

D eductibles in health insurance are options that insurance premium by 20 per cent would be a welcome
option. This can be extended to family health covers,
allow the customer to voluntarily bear a nominal
floaters or any large cost premiums.
portion of the healthcare costs in return for a
reduction in premiums. The option is a standard
feature in developed economies but in India, with still Different Options
nascent health insurance markets, deductible is yet to be a There can be aggregate deductible and a per claim
standard feature. deductible option. An aggregate option would require one
deductible before accepting the claim against a per claim
Deductible does seem counterintuitive to the basic premise deductible which needs a deductible payment for every claim
of insurance that is transfer of risk. But in certain made. Between the two, an aggregated deductible would
circumstances, if the trade-off provided (between deductible imply a lower outgo and should be the preferred mode.
and discount) is valuable and bearing the deductible is a
reasonable assumption, then deductible can lower the cost Similar to deductible is Copay option. Similar in all manner,
of premiums. We look at the need for deductibles, the but the upfront payment by the policyholder is calculated
different forms of availability and ideal cases of application. as a percentage of claim rather than as a standard amount
in a deductible. While deductible is a passive way of reducing
Deductibles premiums, a copay can distort the nature of protection. If

For health insurance cover of Rs. 5 lakh to Rs. 1 crore, the policyholder is to bear a portion of costs, which can
deductibles offered can be in Rs. 10,000 to Rs. 25,000 range 10-25 per cent for claims, any claim above Rs. 35 lakh
range. That is, to cover a claim made of Rs. 1 lakh, would imply a considerable outflow of cash, making
policyholder must first make deductible payment (Rs. insurance ineffective. Between deductible and copay
25,000); only then will rest of claim (Rs. 75,000) be (without an upper limit) a deductible is a sound option.
considered for processing. A topup plan also involves a deductible, which is an extension
For the insurer, more than the savings on claims, the of concept of deductible. Topup plans (covers range from
advantage is from genuine claims and lower processing costs. Rs. 10 lakh to Rs. 50 lakh) are plans separate from base
The nominal amount can address all the smaller claims, which health insurance, which are triggered after exceeding a
would have been made by the policyholder sans a deductible preset deductible limit, generally ranging at Rs. 35 lakh and
plan which saves on costs for processing the smaller claims. met from the base insurance. As can be seen, topup linked
Also, deductible lowers any slippage to fraudulent activity as deductible limits are generally met from the base plans and
upfront commitment of money will deter claims from hence range in lakhs and are a blownup version of the base
policyholders who are not acting in good faith. plan deductibles.
The policyholder should consider deductible insurance, if the For policyholders, a manageable amount for deductible upon
savings on premiums are in the range of 1525 per cent, incidence of a health risk is a better option to lower premium
which they generally are. This makes it ideal for costs, which are a constant. The insurer, in a bid to attract a
policyholders who find premiums on the higher side of better clientele with lower processing costs, lower level of
affordability and are willing to make an out-of-pocket frauds and marginally lower claim outgo, is willing to let go a
deductible payment if the need arises. portion of premiums, favouring the policyholder. This can be
utilised to plan insurance costs optimally.
Siddharth Singhal of Policybazaar.com heading Health
Insurance division feels that deductible is a reasonable On the flip side, policyholders must consider that, with or
option to manage premiums cost if one is willing to front without a deductible option, consumables and nonmedical
the agreed upon amount for healthcare claims. In case of costs are being borne by the policyholders and any other
health insurance for the elderly, where by virtue of age costs that are subject to sublimits and hence not fully
alone health premiums exceed Rs. 75,000 to Rs. 1 lakh a covered. The policyholder will have to bear deductible cost
year, a Rs. 25,000 deductible plan lowering the cost of and consumables cost in such cases. (Refer to Business Line)

46 December 2023 The Insurance Times