A core principle, that I have been taught, in building a career is to always provide solutions when asked a question. Many years ago, in my first job at an FMCG company, my boss and I would travel into the interiors of Andhra Pradesh where he would ask me about the crops on the roadside, harvesting cycles, Telegu signposts, and erratic sales. I answered all his questions confidently, safe in the knowledge that neither of us knew the answers. Over the years, I like to believe, my solutions have become more fact based.
Two incidents last week reminded me that I do not always have all the answers and, my field of work, insurance has considerable limitations. I was invited to a panel discussion on mental health and insurance. The audience consisted mostly of caregivers and some suffering from mental illnesses. The panellists were from insurance, NGOs and the medical profession. The most poignant question was from an 80-year-old, ram-rod straight gentleman who said that he had taken care of his schizophrenic daughter all his life but "is there an insurance that can take care of her after I die?" We, the panellists, spoke about risk, underwriting and products but the plain fact is that insurance cannot help in this situation.
The second incident concerns a migrant family that I have known for a few years. A member of the family developed high fever and we directed him to a private hospital. Since hospitalisation costs were high, about Rs 30,000, he went to a nearby secondary-care government hospital where no beds were available, and so was redirected to a premier tertiary government hospital. Here, he was admitted but had to sleep on the hospital floor, for lack of space. After a day, worried about the poor hygiene, he decided to return home, suffered a relapse and died a few days later.
There are many situations, such as these two, where insurance cannot help. If you are already ill, for example. People suffering from illness are the most eager to buy health insurance. But, for most, it is already too late. If you have had a disease that impacts one of the core body systems - cardiac, endocrine, mental health, neurological, renal, among others - then it is difficult to buy any insurance at all. For people suffering from mental ill-health, the issue is not so much that mental illness costs cannot be covered but more that even their physical ailments are not insurable. You have to buy health insurance when you are well and do not need it.
Similarly, insurance is ineffective if the main costs are for out-patient medicines, diagnostic tests or home care. In mental illnesses, the caregiver's time is most expensive. In diseases such as stroke, where hospitalisation may not be extensive, the primary cost is an inability to work. Traditional mediclaim does not pay these costs. Some newer products can help but in a limited way.
Over the years, critical illness plans have steadily improved and now include diseases that do not require hospitalisation, such as stroke, Alzheimer's or Parkinson. This insurance pays a fixed benefit not linked to actual medical costs.
Insurance does not help in cases that require long-term care. The commonest afflictions of the elderly require high-quality home care for life. Nurses or paramedics may be needed on call. In many situations, assisted living is required. These costs are hard to insure. In some international markets, long-term care insurance has been introduced, rather unsuccessfully, because care costs are extremely high.
Insurance is not a substitute for building quality medical capacity. For the migrant that died, the issue was that both the private and government hospitals failed to give him basic care in a hygienic or affordable manner.
Understanding these limitations is the starting point of finding meaningful solutions. From an insurance standpoint, we must build scale and acquire better morbidity data. Scale allows insurers to insure riskier lives and diseases. The costs of a few ill patients are spread over a larger base and this allows the business be sustainable. Group health insurance, that companies or communities can buy, covers many lives in one go and is able to insure people that are uninsurable in individual insurances. The information on morbidity is basic. Illness rates are not easily available.
Doctors and insurers, always at loggerheads, must be brought together in a meaningful way for effective solutions. Perhaps then insurance can break out of some of its limitations.