Category Archives: Insurance

Corona Pandemic – Life and Health Insurance

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Greetings from PenguWIN,

                                            The corona pandemic has impacted lives of everyone of us. It has made us sit back and seriously think about the welfare of our dependents. Forget creating wealth for them, their livelihood will be affected if proper planning is not done, especially young families where the spouses have (or one of them) a comfortable salary and their family would be dependent on this. Lives of young people were taken away. The official count itself is 4 Lakhs and this number is always disputed (expected to be higher)

Providing a safety net to our beloved ones is not a humongous task and can be done with 3 simple tools:

Life – pays a lump-sum or periodic payments to dependents on death of the insured,

Heath – when you or your family members are sick and hospitalised which happened to many during the pandemic and

Critical illness – when you get diagnosed with serious ailments that require huge expenses like Cancer, Chronic Liver or Kidney or Lung diseases, Coma, Parkinson.

Most of you might already have some or all of these through the companies that you are employed (group insurance). Professionals and small and micro entrepreneurs who are not formally employed and on their own will have to ensure that they have these in place.

People who already have all the three, life, health and critical need to review their adequacy of coverage. Without going into the calculation of coverage, a life insurance cover for a young family of  30 years old bread winner who makes a lakh per month, spouse who is a home maker and small kids, 50 lakhs cover will be too less, if the children need to be provided for studies upto a bachelor’s degree.

Similarly, a middle management employee who has been provided 5 lakhs of floater health cover by their company would have struggled if any of their family members would have been hospitalized for over a week due to Corona as the bill would run to a lakh of rupees per day in a Grade A hospital.

In health insurance you have an option of taking a super top-up, where the basic coverage will be done by your main insurer and anything over and above will be taken up by the top-up provider. Say, your Corona bill had run to 8 lakhs and your company health insurance has a limit of 5L, the first 5 lakhs of the bill would be taken by the company provided insurer and the additional 3 L will be taken up by the top-up provider. If the claim was only 5L or less then there is no claim for the top-up insurer and hence this policy works out cheaper than a overall base policy of say, 8 Lakhs.

Please make sure that elderly people (50+) buy a cover at the earliest as the insurance premium goes up with the age (and risk premium is higher with age) and in case of lifestyle diseases like BP, Diabetes, Heart problem, some insurers can even refuse providing insurance cover.

If you have any questions, please feel free to reach out to me.

Who is Right?

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Dear Friends,

                            Navratri wishes to all of you!

In this titbit, I am presenting a real-life case of Life Insurance and leave it open to you for response as who is right!

Mr. Mayur, aged 32, IT professional lives in a newly purchased property along with his wife Shilpa, homemaker and 1-year old daughter Niveda. Mayur has taken a home loan of Rs. 90,00,000/- to be paid over 20 years resulting in a monthly EMI of 84,000/-. He does not have any other assets and both Mayur and Shilpa will not be beneficiaries of any inheritance.

One of Mayur’s colleagues, who knows his background, suggests that Mayur should meet a professional investment advisor and seek his help to plan his finances. In the initial meeting with the advisor (Manish), which was brief and more like an icebreaker session, Manish suggests that Mayur needs to buy a life cover as any contingency to his life will be a huge burden on his family. Based on the evaluation of Mayur’s human life value (HLV) by both Income Replacement and Expenses & Liability approach, Manish determines that Mayur would need a cover of atleast 2 Crores. Manish recommends Mayur to buy a 1 Crore term cover from 2 Life Insurers totalling 2 Crores of Sum Assured (SA). The total premium for 2 Crores sum assured would cost approx. Rs. 20,000/- per year

Mayur feels happy that this insurer is going the extra mile to service him.  The representative from Insurance company 2, meets Mayur and asks him the background of the Insurance requirement. Once he understands the requirement, he makes a different pitch to Mayur. Mayur has anyway bought a 1 Crore term insurance which will not provide him anything in return and the entire money paid to the insurer will go waste. Instead he proposes a ULIP cover with a premium or Rs. 12,000/- per annum that will provide a small SA of 1 Lakhs or the value of the investment, whichever is higher.

He convinces Mayur by showing him different scenarios of the return potential of the ULIP, with 100% equity investment. The Equity market soared that year and the ULIP bought by Mayur attained a value of 16,000/- for an initial investment of 12,000/- Mayur continues to pay for both the Term Cover and ULIP and at the end of 5 years finds the value of his ULIP to be about 1.25 Lakhs while the 10,000/- premium that he pays for the Term Cover has gone down the drain leaving him confused and thinking whether the decision of taking a Term Cover was right.

< PenguWIN TITBIT # 102 – Who is Right?>

Business Ethics of Insurers

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Hello Friends,

           Last weekend (Feb 25/26) I watched a movie called “Rainmaker” directed by Francis Ford Coppola, rated as one of the best directors and has movies like Godfather to his credit. The movie is based on a book written by John Grisham, Lawyer and acclaimed writer of legal thrillers.

Matt Damon, plays the role of an Attorney, very enthusiastic and fresh out of college. He signs up the case of a poor family with their son, about 20 years old, suffering from Leukemia, which can be treated through bone marrow transplant. But their Insurance Company rejects the claim multiple times (saying treatment is very high and chances of survival is low) and Matt files a lawsuit against the Insurance Company. The insurance company is ruthless and as a protocol rejects every claim, atleast the first time, without going into merits of the case (their operational manual say “reject” the claim). The diseased victim dies during the trial, as the time frame to start the surgery got delayed. The parents of the victim pledge the entire money to social cause, if they get the verdict in their favour, as their son is dead and don’t intend to use that money for themselves.

Finally, the Jury gives the verdict in favour of the victim and his poor family and asks the Insurance Company to pay a huge amount as punitive damages, resulting in the Insurance Company going bankrupt. 

Before you start thinking that why PenguWIN has shifted lanes from writing about “Financial Topics” to “Movie Reviews”, let me assure that this is a personal finance blog and I am not a movie buff to demonstrate my competency in Reviewing Movies!

On the 2nd March (Last Thursday), I read an article on consumer protection by Jehangir in Business Standard. When I read the article, I was really shocked. It relates to a life insurance claim of a person for a Sum Assured of 2 Lakhs, who was hospitalised in Amritsar and died. The Insurance Company repudiated the claim made by the victim’s wife on grounds that the victim was suffering from chronic liver disease for 18 months and the same was not revealed when the insurance policy was taken. I don’t want to name the Insurer, which is what is frightening more so for the claim amount (I have attached the paper cutting in the link). 

https://penguwin.com/insurance-rejection-v02/

The Insurance Company lost the case in Gurdaspur district forum but went ahead to appeal in Punjab State Commission. The Insurer relied on Medical Certificates obtained from 3 doctors that claimed the victim was an alcoholic and had suffered cirrhosis of the liver (an abnormal liver condition in which there is irreversible scarring of the liver, resulting in failure).

The state commission upheld the Insurer’s stand and set aside the district forums award. The victim’s wife approached the National Commission and contended that her husband was a school teacher, used to go for regular health check-ups and the reason for death was an accident which had nothing to do with alcoholic Cirrhosis of Liver and produced the relevant records. This is where you will see another twist..

The national commission, on reviewing the medical certificates that the insurer produced from 3 doctors, found several loopholes – 1 is not even a allopathic doctor and the handwritten certificate did not have the date and reference. Similar observations were made on the other 2 certificates and the medical record of the hospital showed that it was uncertain whether the liver problem was associated with alcoholism. The National Commission indicted the insurer for their fraudulent practices and decided the verdict in favour of the victim.

Apparently, a claim cannot be declined on assumptions or on basis of medical certificates which are vague. The name of the Insurer and the way they had conducted themselves to decline a small sum of 2 Lakhs is definitely worrisome.  

Does the lawsuit ring a bell with a similar one which caught the attention of the entire the country?

 

<Blog # PenguWIN 1050 – Business Ethics of Insurers>