Gita from Kanpur will pay a lower premium for health insurance products than sister Sita in New Delhi or cousin Nita in Mumbai.
She gains from differential pricing that private insurers intend to introduce for their health insurance products, charging less from people living in smaller cities, where medical bills are significantly lower than the metros.
So, the Kanpur teacher’s premium for a health insurance could be 15-20% lower than her sisters living in New Delhi or Mumbai.
The move is expected to increase health insurance cover in smaller towns, where people often avoid buying such products because they find the price too steep. Currently only 17% of India’s population has some form of health insurance.
In 2014, India’s top six metros collectively reported 25% of all health insurance claims and received 30% of the total payouts. Besides, the average claim in the major metros varied between Rs 45,000 and Rs 35,000.
The average claim size in states such as Bihar and Kerala, on the contrary, was between Rs 10,500 and Rs 15,000. The data bring out the disparity between cost of healthcare in metros and rest of India.
Typically, the premium depends on treatments provided, the age of the customer and her claim history.
But the city where the customer resides has not been taken into account while fixing the premium.
Several companies such as Bajaj Allianz and Apollo Munich Health Insurance have started adopting differential pricing for health insurance premium.
Sources said ICICI Lombard and Reliance General Insurance too are looking into it.
“The rationale behind adopting differential pricing was to make sure that people living in high-cost zones do not cross-subsidise for their counterparts in low-cost zones by paying the same premium. We divided the country into two zones depending on medical costs and our past claims experience,” said Abhijeet Ghosh, the head of health insurance at Bajaj Allianz General Insurance.
“Therefore, our customers will now pay a premium that will commensurate to the cost of treatment she is exposed to in case of a medical exigency,” he explained.
Rakesh Jain, the CEO of Reliance General Insurance said his company is exploring the strategy of selling a product at different prices as part of its larger bouquet.
“We want the best medical treatment without any compromise for our customers.”
But for a patient, who has to be moved to a bigger city for treatment, Bajaj Allianz said she will have to share 20% of the payment on the admissible claim amount.
According to industry estimates, more than 78-80% of healthcare expenses are funded by Indians out of their pocket and in most cases they dip into their savings or sell off assets.