Health insurance a consumer premium during crisis

Health insurance a consumer premium during crisis

By I. Christianto

JAKARTA (JP): Thanks to the financial turmoil plaguing the
country and chipping away at disposable income, more Indonesians
are signing on as health insurance policyholders, going against
the popular belief that local awareness of its benefits is low.

David R. Rachman of PT Asuransi Jiwa Sewu New York Life said
the crisis had triggered dramatic increases in the price of
medicine and hospital rates, forcing people to reconsider health
insurance as an option.

A director of ING Insurance, Nanny Nusalim, agreed that people
were more aware today of how insurance could help them guard
against medical emergencies.

"The crisis supports people's awareness about buying health
insurance. The growth rate in policyholders now reaches 70
percent, compared to only 30 percent before the crisis." Her
company has provided health insurance in Indonesia since 1976.

She admitted that premiums had also increased, but argued that
health insurance still worked out to be economical.

"We can't avoid the increase in premiums. But the rise is
still much lower compared to the current prices of medicine and
hospital treatment costs."

Premiums have risen by an average of 25 percent, while
medicine prices increased from 200 percent to 300 percent, she
added.

Vivien Kusumowardhani of PT Aetna Life Indonesia said the
bankruptcy of corporations and layoffs presented obstacles in
marketing efforts for health insurance.

"But we saw growth of 70 percent in premium income in
September this year amid the crisis. Membership also grew at 40
percent compared to last year."

Awareness

Many Indonesians remain reluctant to sign up for policies.

Rachman said a contradiction existed in how consumers weighed
their expenditures.

"Many people still consider the cost of health insurance as
expensive. They don't understand the benefits."

Many Indonesians want to see physical evidence of their
purchases, something absent in an insurance policy.

"This is actually the Asian cultural background. People want
to get something tangible when buying something. Many still don't
really comprehend the concept of insurance," Nusalim said.

Kusumowardhani commented that Indonesians had traditionally
relied on the extended family network to help them out in a
health crisis.

"When ill, a person believes that she or he still has parents,
brothers, sisters, uncles and aunts to take care of him or her.
But the more educated a person is, then the more aware he or she
will be of the importance of joining health insurance."

Hendra, a 35-year-old private company executive, is proof.
Currently undertaking a postgraduate study program, he said he
viewed health insurance for his family as a security blanket.

"Besides, I don't want to trouble my parents and parents-in-
law if my wife, me or our children fall sick or are
hospitalized."

His company's insurance plan covers his dependents.

Robert, 33, said he understood the benefits of health
insurance.

"I am covered by health insurance from my company."

Agustine, 33, is a double policyholder. She has health
insurance from her employer "but I have also purchased life
insurance".

There are those who are interested in insurance policies but
the cost is beyond their means.

"I really want to buy one, but during this financial crisis, I
don't have any budget for it," said Sumartoyo, 25.

Scheme

Group and individual are the health insurance schemes on
offer, with the main difference between the two being the
requirement of evidence of insurability.

People planning to buy individual insurance are usually
required to answer a health questionnaire and undergo a medical
examination to provide evidence of insurability to the insurer.
Not all insurers require the medical exam.

An insurer may decline coverage on the basis of the
applicant's personal profile including lifestyle habits, age,
health, medical background or other items with a bearing on risk
acceptance.

Which scheme provides greater benefits?

People with known health problems and who might otherwise be
unable to obtain individual insurance could be covered
automatically upon employment without providing evidence of
insurability. However, there may be some limitations to their
coverage.

Group insurance commonly offers a lower cost per unit of
protection than individual insurance because of the economies of
scale resulting from selling, installing and servicing one plan
covering many individuals. They are typically more flexible and
tend to provide more liberal benefits than individual coverage.

In the meantime, many insurers offer individual insurance as a
rider. This means a person has to join a life insurance plan
first as a primary product before taking the health insurance
plan.

Group insurance offers several advantages, both for employers
and employees.

According to Rachman, employers will enjoy fixed budgets,
minimize administration loading and control costs.

"It's not a secret that some people can cheat or manipulate
health allowances. Employees can claim reimbursement for any
prescription though they are not ill. With an insurer, such a
case will not happen. Or, at least, the risk is on the insurer."

Employees will be more protected because of the reimbursement
and flexibility, he said. Indemnity plans provide the insured
with substantial freedom relative to the choice of physicians,
particularly important for those who travel a lot, he added.

Rachman said many leading companies now had insurers to
improve professionalism.

"Many big companies have had insurers, but the small ones are
still self-insured, using their own plan for medical expenses.
Family-run firms are particularly reluctant to use insurers."

Kusumowardhani said Aetna Life had a growing client roster.
"About 80 percent (of the group insurance) are domestic
companies."

How to make the best choice from the 60 insurers in the
Indonesian market?

Rachman suggested that prospective policyholders examine
company profiles and look into the backgrounds of the owners,
partners and other relevant facts.

"It is important to fathom the investment policy, how the
insurance company reinvests the money. Also check the claim
payment schemes. Do the annual premium rates significantly differ
from year to year? What people need and what the company offers
must be matched."

Nusalim said the public was seeking information about foreign
or joint-venture insurers because of the crisis shredding public
confidence in domestic banks.

He said most disputes over claims were insignificant and
easily resolved.

"In our experience, if there is a dispute, it's usually only
because of invalid form filling. Many people get the forms filled
by other people so there are sometimes small disputes. It is,
however, trivial."