Easy as one would like to make it for readers, choosing the right insurance policy takes application of the mind. The customer’s mind.

There is no escaping that if health policy X has a set of offerings, it may or may not imply the same fit or value for any two persons. As I promised in the preceding instalment of CoverNote and have written extensively about in various earlier instalments, you can make it simple and smooth and do so by yourself.

Too many variables

Picking up on one of the points in the end/ former colleague’s long rant on health insurance (discussed earlier), ‘too many variables was a major problem’.

Too many variables and too many variants is a self-defeating situation because too many choices means no choices. One wishes the regulator or the self-regulatory organisations of the insurance industry would recognise and streamline it as was done with mutual fund offerings.

But, back to how to choose an insurance policy. It is an elaborate process and let us do it justice. Here is a toolkit, revisited and revised!

Let us say you are buying health insurance. To be specific, hospitalisation insurance. Today, you can buy one from any general insurance company, life insurance companies apparently will be allowed to offer these policies in the future.

This policy, introduced in the 1984-85 timeframe, when only the four public sector general insurance companies existed, was brand-named Mediclaim. Now, there are several dozen general insurance companies each offering this category with evocative brand names but ‘Mediclaim’ has come to be used generically for this category.

Arogya Sanjeevani Policy

To start the process of choosing, I strongly recommend you pick an insurance company, any company. Let’s say ABC General Insurance Company Ltd. On its website you will find details of various health policies and what you need to pick is the one named ‘Arogya Sanjeevani Policy, ABC General Insurance Company Ltd.’

Mandatory offering

This is a standardised policy devised by the Insurance Regulatory and Development Authority of India (IRDAI) and has to be offered mandatorily by every Indian general insurance company. It has a set of coverages, terms and conditions and even the name is standardised as Arogya Sanjeevani Policy, followed by the company name.

Please study this policy well as it is the template you will use to decide what policy you finally want to buy. What does one look for in a policy? The ensuing instalment of CoverNote will elaborate on that.

Premium calculator

But here is some interesting homework for you, one which you will find illuminating. Look for a premium calculator or premium rate chart on the website and make a note of the premium for your choice of Sum Insured and your age-band. Now, do the same exercise for two more companies.

Disparate pricing

You will find a range of rates for the same product! This is because insurers are free to set their premium rate for this policy and this would well be your first glimpse of how disparate pricing is and ponder on reasons why. If you can come up with an explanation or justification, do share it in an email with the Moneywise team and we will try to discuss it.

(The writer is a business journalist specialising in insurance & corporate history)

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