Nov. 2, 2009 (The Hindu Business Line) --

Remya Nair

Mumbai, Nov. 2 You can pay lower premium by buying two health insurance policies instead of one, for the same sum assured.

General insurance companies are offering top-ups to the existing health insurance policies. Top-ups are useful when a customer wants to get a high sum insured which is not easily available in the market.

For example, a Rs 5-lakh cover is common in the market. But if you want a Rs 10-lakh cover, then you can buy a Rs 5-lakh cover and then top it up with an extended cover.

Taking the top-up cover is also easy on the pockets and works out cheaper. For instance, a 30-year-old customer can buy a Rs 4-lakh cover by paying a premium of around Rs 4,500. But if the customer buys a Rs 1-lakh cover and then takes a top-up for Rs 3 lakh, the total premium will work out to around Rs 3,000.

At present, companies such as Star Health and Allied Insurance, United India Insurance and Bharti Axa (NYSE:AXA) General Insurance offer these products.

“Due to the economic turmoil, companies have been trying to reduce their expenses. One of the casualties of the cost-cutting exercise has been the group health cover they offer to their employees.

“As companies pay less premium, the cover and the various features offered under the insurance policy comes down. The limits and features get reduced. So customers can buy a top-up cover and make the insurance company pay if they exceed the cover offered by their employers,” said Mr Kimsoon Chua, Chief Operating Officer, Bharti Axa General Insurance.

Besides, a group policy is a standard product and not customised to meet the needs of individuals, said Mr Chua.

Customers can take the top-up cover at a low cost. The pricing for these products is attractive as the risk is layered. As the customer goes in for the top-up cover only when he crosses a threshold limit, it is economically viable for insurance companies to sell the product, said Ms D. Rama, Assistant Vice-President, Star Health and Allied Insurance.
Targeting uninsured

However, companies are encountering problems when it comes to selling the product.

There is a large market for people who are not insured. It is easier for the distributors to sell products to the uninsured rather than targeting customers to buy a second layer of insurance cover.

For distributors, the aim is always a faster sale, said Mr Rahul Aggarwal, CEO, Optima Insurance Brokers.

So, despite the fact that these are good products, the off-take has not been good, said Mr Aggarwal.