Loading in Health insurance: Know about it!

 claims experience.  No retail insurance product (other
Suraj's father suffered from a heart attack last yearthan Health Insurance) compares what is paid (as
and had to undergo an emergency bypass surgery.premium), with what claims have been made, it
Fortunately the surgery was a success. Surajdefeats the entire purpose of insurance".
recovered most of his medical expenses from theWhile the above are loadings at renewal based on
family health insurance he had. Suraj was relieved; inprevious year's claim/s, there are some loadings
fact he was thankful that he had a health insuranceapplicable even at inception based on the risk factors:
policy. But nothing prepared him for the jolt he got 84) Loading on certain Pre-existing diseases
months later when the renewal notice for his healthNational's Varishta Mediclaim has a system of loading
insurance policy arrived; he found that his premiumfor Diabetes and Hypertension. You will have to pay
was hiked by almost 50%! From Rs.10, 000 premiuman extra of 10% on your total premium for each of
p.a. he now had to pay Rs.15, 000. After checkingthese diseases or an additional 20% for both these
with his agent and the policy wordings, Suraj wastogether. There is also loading for other diseases like
informed that something called as ‘Loading' wasParalysis and Blindness.
the reason behind the hike.5) Loading on your age
In several cases, the hike in the premium after aMany health insurance companies, especially Senior
claim makes it quite difficult for many customers tocitizen policies have a system of loading not on the
renew their policy and, not being prepared for such aevent of claim but after a particular age. New India
hike could result in them not having a health coverAssurance's Senior Citizen Mediclaim has the following
for sometime or miss out the continuation benefit ofsystem-
their original policy. To ensure that you don't get aLoading for renewal between 81- 85 years– 10%
rude shock on renewal of your policy after a claim,of the premium for age band of 76-80 yrs.
understand loading and what to look out for whileLoading for renewal between 86- 90 years– 20%
buying the policy.of the premium for age band of 76-80 yrs.
What is Loading?6) No Clear Cut definition: Stay away!
Loading is the amount charged by the healthThere are many policies which do not have a method
insurance company on your renewal premium whenof calculating the loading but which mention in the
you make claims in your policy. Almost all healthpolicy wordings that they may load the premium in
insurance companies include loading in their policies.case of adverse claim experience. This is very
There are different ways in which loading isdangerous as the loading can be anywhere from 5%
calculated by the companies.to 100% of the premium and the customer can do
The different kind of systems for calculating Loading:nothing about it. So if you are buying a policy
1) Loading for every year of claimwith such vague conditions, it would be wise to
Oriental insurance's Happy Family has loadingreconsider the decision to buy it.
according to this system. For every year you claim,Max Bupa: A New Approach
you will have to pay 5% more premium the nextMax Bupa is one of the few companies that do not
year which will go away if you do not claim that yearload the premium because of claims. Max Bupa's CEO
or again increase by a further 5% for every year inDr. Damien Marmion had said in an interview that they
which you make a claim. The maximum loading in thisdo not want to give the customers the wrong idea
plan is 20%.that they care more about the money than people
2) Loading depending upon the amount claimedby giving discounts for no claim or loading after
In United's Family Medicare Policy, the claimant isclaims. They have premiums that depend on your
subjected to loading if he claims 3 or more timesinage and your locality rather than discounts for claim
two consecutive years. Amount loaded on thefree years or loading after claims.
premium depends on the percentage of the SumWhat you should look out for?
Insured that was claimed. Here is their table whichNow that you have seen most of the methods of
explains the calculation.Loading, we suggest the following tips:
- Upto 25% of Sum Insured - 25% loading on- Ask your health insurance agent or broker about
applicable premiumloading before you buy a policy.
- 26 to 50% of Sum Insured - 50% loading on- Select a policy with a clear method of calculating
applicable premiumthe loading.
- 51 to 75% of Sum Insured - 75% loading on- Other things being equal, companies which do not
applicable premiumhave loading as part of the company policy are the
- Above 75% ` - 100% loading on applicable premiumbest.
Even in United's Family Medicare policy, loading will be- Other than that select a policy from a company
removed after three continuous claim-free years. Thewhere the loading remains constant irrespective of
‘No Claim Discount' will be applicable only afterthe amount and which goes away after some claim
completion of four claim-free years.free period of time like oriental's happy family floater.
3) Loading depending on the claim ratio- It is risky to buy a policy where loading is calculated
Some policies calculate their premiums according tofrom the claims ratio as it is going to be heavy on
the ratio of claims to the premium paid. That is if youyour pocket after a claim since even a minor
claimed Rs.20, 000 when you had paid a premium ofhospitalization will result in a very high claims ratio.
Rs.10, 000, the claim ratio for the policy is 200%, andIRDA's Stand:
hence here the premium would be loaded as per aInsurance Regulatory Development Authority (IRDA)
table according to this claim ratio.has not passed any directive on Loading per se but
In Star health's Family health optima plan, this type ofon receiving several complaints from senior citizens
loading is applied. It is also mentioned that the loadinghas issued this following advice:
ratio would not exceed 100% of the premium1. The loading of premiums if justified for renewals of
amount.mediclaim Policies issued to senior citizens shall not
- Claims ratio between 100-125%- 30% loading onexceed 50-75% of the premiums charged prior to
premiumthe loading.
- Claims ratio between 126-150%- 50% loading on2. Senior citizens shall not be compelled by the
premiuminsurance companies to migrate to other health
- Claims ratio >150%up-to200%- 80% loading oninsurance products of the same company, if it is to
basic premiumthe disadvantage of senior citizens.
Mahavir Chopra, Head, e-business of MedimanageIs loading justified?
Insurance Broking Pvt. Ltd., says "Ideally, it (loading)Sudhir Sarnobat, Director, Medimanage Insurance
isn't supposed to be applicable for individual policies.Broking Pvt. Ltd, says "The loading on individual client
 Claim ratio is actually meant to be calculated on theis absolutely unfair when they have claims in expiring
business portfolio level of an insurance company or inpolicy year as it principally defeats the purpose of
group insurance. It seems, due to lack of significantinsurance that is risk transfer.  Loading is a concept
personal as well as macro level health premium andwhich is acceptable for Group Risks where the policy
claims data that would have helped Insuranceconditions are liberalized due to group business".
companies to price premiums scientifically, a reactiveTo know more about Loading in Health insurance:
system of loading premium based on claim ratio wasKnow about it!
introduced, where the premium depends on the past