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."