Are You Paying Higher Premium For Your Health Insurance?

Health is considered to be the most important asset of any individual. But in India, the statistics on health insurance are shocking. The recently released National Family Health Survey (NFHS-4) by the ministry of health and family welfare shows that less than one-third (29 per cent) of households have at least one usual member covered under health insurance or the health scheme.

Also, from a motivation for the customer point of view, in an age where customisation is demanded in every purchase decision, the health insurance options available in the market are still playing catch-up. For example, a resident of Dehradun has to mostly pay the same amount of premium for the policy that a resident of Delhi has to pay for the same coverage and sum insured.

Now one may argue, what’s the issue in that? Well, the environmental conditions, the medical costs and the lifestyle in the two cities are completely different which leads to different risks and cost of treatment/claim (if and when a claim happens). So, people paying the same premium, sounds unfair right?

Which is why some of the insurance companies are now offering a zone-based/city-based pricing. And this is something that the customer should also look in for while buying their plans, especially when it is a customer living in a smaller city or non-metro.

What is Zone-Based Pricing?

An insurance company divides all regions in India into approximately 3 Zones, A, B and C. Each zone has cities with similar medical treatment costs. Therefore, the higher the medical cost, the city moves in a higher zone (Zone A is higher than Zone B which is higher than Zone C).

Zone-based pricing is a custom pricing model that helps people pay the right sum insured and saves them for paying the same as a bigger city.

It offers a customer of a particular zone, a premium that is customised to the zone, calculating the medical costs and expenses that they may incur for treatment in that zone. For example, a Mangalore resident will be paying the premium customised to Zone C while a Bengalururesident will be paying the premium of Zone B.

Advantages of Zone-Based Insurance:

Reduction in Premium: Zone-based insurance reduces the premium of the policy by at least 10-20 per cent, depending on your city of residence. But if the customer buys a Zone B cover and is admitted to a hospital in Zone A, then the customer is liable to pay a difference in the amount under co-payment at the time of claims. Though there is a solution to that as well, mentioned below:

Zone Upgrade Option: As mentioned above, a Zone B customer may often look for treatment options in a Zone A city, sometimes due to better medical facilities or just that a renowned doctor sits out of a Zone A hospital. For example, a son working in Bengaluru (Zone B) needs to admit his father in a Mumbai (Zone A) hospital for advanced treatments. In such a scenario, the customer has two options:

A co-pay will apply as they are getting treated in a higher zone or;

If they feel that they would need treatment in a higher zone city, at the time of policy buying itself, they can add a Zone Upgrade addon so that they don’t have to pay any co-pay.

Therefore, in a nutshell, zone-based insurance will hopefully generate interest in health insurance as people will pay lower premiums if they are not living in higher zone areas. This is something that will also appeal to the new generation who are now even more aware of their rights and are always comparing costs and benefits online.


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