Buying health insurance in India? Think again.

It is generally understood that buying health insurance is a good investment.  But is it? At the end of the day, it is a good investment only if the insurance company makes good on any claim you file. And that is a big IF. But as the data shows, insurance companies are notorious for not paying claims. They make it extremely easy to buy but very hard to get a claim paid. Let's examine this in more detail.

It is important to note that there are 2 classes of insurance buyers - a group policies, and individual policies. A group policy is bought by employers for its employees, whereas individual policy is something you buy for your family or yourself. Insurance companies deal with these two classes separately. 

In India, IRDA is the regulating authority. You will find a lot of information buried in their annual reports. In my ample free time, I was reading their most recent 318 page report. Here are some interesting facts:

1. There are 4 govt. owned insurance companies that have 58% market share in non-life insurance business (which includes health, fire, marine, motor, and other)  whereas 16 private insurance companies have the remaining 42%. For example, ICICILombard has only 9.74% market share.
2. The govt. owned insurance companies saw an increase in 31% year-over-year in the number of policies, whereas the private companies saw a mere 15% growth. This shows that the public trusts the govt. owned companies more than private companies.
3. Health insurance is growing at 30% annual rate over the last decade.

Incurred Claims Ratio - From IRDA Annual Report.

You will understand how the insurance companies deal with these two classes when you look at the columns "Group Insurance Schemes", "Family Floater schemes", and "Individual insurance" in the incurred claims ratio of the IRDA annual report for 2012-13. The family floater is the one that is typically bought by individuals for their families, and the individual policy is for oneself only.

1. Private Insurance companies have a 92% incurred claims settlement ratio for group insurance, but only 71% for family floater policies, and shocking 49.5% for individual policies.

2. Govt insurance companies have 109% incurred claims settlement ratio for group insurance, but only 77% for family floater policies, and 101% for individual policies.

Why is this? From this data, it looks like the insurance companies are more than happy to pay the claims from group insurance rather than family policies. There is a steep 20% difference in incurred claims ratio. This is obviously due to the bargaining power of employers when compared to individuals buying for their families. 

For individual policies, the payout from private insurance companies is half as likely. The individuals are indeed getting a very raw deal from private insurance companies, and this is something the IRDA needs to investigate. 

What does this mean for individuals trying to buy health insurance? Be careful and don't rely too much on your health insurance.  The likelihood of getting your claim paid is rather low. Build your own corpus to pay for hospitalizations when your insurance doesn't pay. In the next post, I will discuss some alternate ideas on how to protect you and your family.

Buying IPhone from Airtel - A word of caution

Recently I bought an iPhone 3G from Airtel in Bangalore. The iPhone3G is simply superb - there are no two ways about it. There is nothing that comes close to it - not Nokia 5800, not any product from Blackberry or Samsung. I am really happy with the iPhone. For those looking for more information on the iPhone, look here:

Guide to the iPhone

However, unlike the iPhone, the experience of using Airtel as a service provider has been downright awful. The sales guy at the Airtel showroom at Cunningham Road in Bangalore was too happy to receive the money, but the moment the transaction was done, he would ask me to call 121 customer service from the store for any further questions!!

For example, when you buy the iPhone from Airtel, you are supposed to get a free 500MB/month data plan for 12 months. The service guy claimed to have activated that, but in truth, he did not. I figured this out when I started getting SMS messages every 10 mins with my pre-paid balance constantly decreasing. It turns out that the iPhone was using the GPRS service for some app or the other, and hence the constant charges to my account.

So after getting back home, I went to this website to deactivate the use of the cellphone network for data transfers. This installs a temporary profile on the iPhone that effectively disables the iPhone from using the cell network for data transfers. This is to protect myself from enormous bills from Airtel. Do read the other articles in the guide:

Cost of iPhone

You can always reactivate the iPhone to use the Airtel data network by tapping on Setting > General > Profile and deleting the profile that was installed temporarily.

And this is the word of caution for people buying the iPhone from Airtel: be 100% sure that the free data plan has been activated before you start using the iPhone for internet access. Otherwise, you will be shocked at the bill. At 30paise/50KB, it translates to Rs6/MB or Rs 6000/1GB. And doing 1GB per month is very easy with the iPhone.

Note that you can still access the internet from the iPhone via Wi-Fi at your home or office. It is best to use Wi-Fi because it is fast and there are no additional charges to use the wi-fi network.

I would also suggest that you change the Mail settings on the iPhone so that you check for mail manually. This will reduce your Airtel bandwidth usage when you activate the GPRS plan on the iPhone.

With these precautions in mind, you can enjoy the iPhone better.

Travel Advice for Visitors to Agra and Jaipur

We just returned from a fabulous vacation to Agra and Jaipur. The beauty of Taj Mahal and the forts of Jaipur are really breathtaking. We had a fun time, but the most irritating part of the trip are the vendors who sell junk to tourists.

Tourists by nature are polite, because you don't want to be rude in a foreign country. These vendors take advantage of the politeness and aggressively sell junk to tourists at exhorbitant prices!!

So here's some advice to tourists:

Buying Momentos:

1. Never engage in conversation with the roadside vendors, especially those who pounce on you as soon as you get off your car. There is no need to be polite.
   
2. If you are attracted to some junk and feel like buying it (I feel sorry for you), note that the prices are negotiable (almost 90%). The street vendors peddle stuff costing Rs. 25/- for Rs 1000/- or more depending on the gullibility of the tourist.
   
3. Looks can be deceptive. When you visit Taj Mahal, the thing to buy is a Taj Mahal momento. The momentos all look like made with marble but they are not. Some are soft marble that crumbles like cake and others are hard marble. If you are not sure, don't buy from the roadside vendors or even small shops.

Your best bet for buying momentos are government-approved tourist shops where you are assured of good quality stuff at fixed prices. You won't be disappointed when you buy in these shops.

For example, in Jaipur, we shopped at the Rajastan Textile Development Corporation (+91-141-2671872).

Hiring a Guide:

A guide is a good bet when you visit a historic place. Here again there are a number of unscrupulous people. Hire only a licensed tour guide. Check their id. The prices are also fixed. For example, an authorized guide to Fathepur Sikri in Agra costs Rs 125/-.

Unauthorized guides may charge more or less than the authorized guides depending again on the gullibility of the tourists. Some guides with no knowledge of the place simple read the descriptions placed at the monument!

The downside with hiring a guide to show the city like Jaipur or Agra is that they will invariably include shopping stops, because they get the commission. There is nothing wrong with this but if the guide prioritizes shopping over historic monuments, then you have chosen the wrong guide. The best way is to negotiate the plan before you start the tour. Note that most monuments are open from sunrise to sunset. So if you do shopping during the day, you will miss out on enjoying the monuments.

If you are prepared to handle vendors and guides, I can bet you will have a more enjoyable time.

Happy vacation!

Pen is mightier than car chases

It is very interesting to see that the traffic police in India do not normally chase and flag down the offenders. Instead, they stand in one corner with a pen and a notebook and write down the vehicle numbers of the offending vehicles. And in about 2 weeks time, you get a traffic ticket.

There are pros and cons to this approach of traffic policing.

The pros are that there are no dangerous chases on the roads. The police need not spend a lot of money on equipment and fast cars.

The downside is that there is no way to appeal if the traffic police made a mistake. It could be a transcription error, or it could be no fault of yours. There is no due process when you get a ticket. Simply pay it. No questions can be asked.