Dr Shreeraj Deshpande is a well known Health Insurance expert. He has over three decades of experience in both private and public sectors of the insurance industry. Shreeraj was responsible for setting up successful Health verticals in three insurers, including the Allianz and Generali joint ventures in India. He is a much sought after member of various industry level as well as regulatory committees on Health Insurance. He was awarded a doctorate in health insurance by the University of Pune.

Praveen Gupta: ‘State of Global Air 2020’ showed that 22 children died every hour due to air pollution a day in India. During peak winters, thanks to pollution levels, a passive smoker in Delhi could inhale smoke equivalent of 10 to 15 cigarettes every single day.

With rising frequency & severity of respiratory ailments, is there a case for differential pricing in such locations?

Shreeraj Deshpande: Medical underwriting in Individual Health insurance involves health risk assessment including medical screening wherever required. The health risk assessment which insurers carry out involve seeking information on habits such as smoking, alcohol consumption, existence of life style diseases, occupation, etc., and will depend upon the extent of availability of data and applicability while underwriting. Height and Weight to calculate Body mass index (BMI) is the most common method of health risk assessment. Insurers also adopt geographical based underwriting strategies as well as differential pricing. Broadly this is based on the experiential analytics in these geographies in terms of frequencies and severity. In India Health Insurance is majorly confined to Hospitalization Insurance though Comprehensive Health Insurance is slowly making inroads.

There are various factors which could contribute to the high or lower frequencies and severity of hospitalizations which can include environmental conditions like poor air quality or water quality. The availability of data which can be analyzed and interpreted is very important. When we look at comprehensive health insurance including Outpatient Department (OPD), the more the data available for risk assessment the finer can be the pricing. Insurers do collect International Classification of Diseases (ICD) code wise data and use the same while pricing products.

The changing regulatory scenario would have a very important impact on the way underwriting is done.

One of the fall outs was that the fundamental approach of “Underwriting at Acceptance and not at Claims” started getting ignored which resulted in increased customer grievances.

PG: Do you see a shift in risk assessment: from one largely based on individual lifestyle to also a combination of individual and geographic triggers like air quality, heat, humidity?

SD: Around a decade back Indian health insurers were more into Medical underwriting basis age/sum insured and adverse declarations, the proposer was asked to undergo pre acceptance medical tests. Over the years market evolved and the pre-acceptance medical tests age limit/ sum insured limits got raised. This was also because of pressure on numbers and growth. Insurers who were into business for some time started expanding their book making sales process for health policies easier. One of the fall outs was that the fundamental approach of “Underwriting at Acceptance and not at Claims” started getting ignored which resulted in increased customer grievances.

With the emphasis of the regulator to increase customer confidence, it is now very important for insurers to have prudent underwriting strategies with growth. Insurers will have to use a mix of medical underwriting and other external parameters. This becomes even more important in automated underwriting with use of AI and ML. Analytic capabilities and platforms are now available however suitable data needs to be collated and analyzed. Profiling of customers using AI & ML will happen the way it happens for other consumer products. This should also account for adverse environmental factors.

PG: Once the data is plentiful, do you see a shift from personalized side to extraneous factors? How would that transform the way health insurance is not only underwritten but also how it is bought and sold?

SD: As the portfolio size of any insurer increases the underwriting strategies also change. In the initial periods of building a portfolio, insurers are selective and try to avoid adverse selection etc., by adopting to medical underwriting. As the portfolio increases and with good experience insurers tend to relax their strategies and grow. Ease of sales process with simplified underwriting is something which every distributor would want. Therefore insurers would profile their customers in advance – using AI and ML – well before targeting them.

The regulatory changes also have a major role to play. In some markets denying insurance covers based on pre-existing conditions or discriminating premiums charged is prohibited by law. While Insurers may be allowed to price according to geographic factors / experience, individual underwriting will in all likelihood not be allowed. In such cases use of extraneous data and pre-underwritten products would have a major role to play.

Parametric offerings to protect against rising heat and adverse quality air could become a mass offering.

While insurers do adopt underwriting strategies to balance their exposure across geographies and risk profiles even in Health Insurance it may be unfair for common citizens who are inhabitants in such places to bear the brunt of higher pricing or denial of coverage.

PG: Not just the workplace, living areas and time spent on commute – should you not account for these health stressors? Heat & humidity are known triggers for neurological and cardiac conditions – shouldn’t they be accounted for?

SD: This is similar to what we discussed above. Insurers can definitely consider these while carrying out risk assessment – subject to availability of the data. For example Insurers do generally have a question on occupation, location etc. More detailed questions can elicit more information. While type of job or location could have increased stress but whether the individual also performs activities like exercise / yoga which helps him reduce or manage stress.

How much information insurer can collect, collate and analyze and actuarially use is important. While overall frequency and severity of hospitalization is sufficient for hospitalization products more finer data would be required to assess risks covering comprehensive health care. I believe, as of now, the adverse impacts of climate fall well within the frequency and severity parameters of hospitalization. However, this needs to be fine-tuned with the OPD extension, wherever applicable.

The regulatory changes across economies are moving towards making health insurance available without discrimination to citizens and some markets do not allow refusal of coverage or even differential pricing basis pre-existing conditions. In some markets medical underwriting is used to allow discounts in premiums for medically underwritten proposals. Some markets prefer to adopt community-based pricing where risk is distributed over the community in a geographic distinction. With automated underwriting gaining momentum in retail health – use of AI and ML is increasing with wider use of data.

PG: Would employers be vicariously liable for locating work spaces in unhealthy environments?

SD: This can happen only if the workplaces do not meet regulatory compliance of locating work places or not following applicable regulations such as Pollution Control Acts and hazardous chemicals handling. The Workmen Compensation (WC) Act also lists down occupational diseases which can be revised from time to time. Anything within the workplace the employer can be made responsible, however, the responsibility of keeping geographic environment healthy, pollution free is a collective responsibility of the governments and citizens.

Health Insurance is a social need and changing regulatory scenarios across economies emphasize that health insurance should be made available to all citizens and cannot be denied or discriminated.

PG: Physical assets prone to wildfire, floods, windstorms are increasingly becoming uninsurable. Could human health in challenged locations be next?

SD: While insurers do adopt underwriting strategies to balance their exposure across geographies and risk profiles even in Health Insurance – it may be unfair for common citizens who are inhabitants in such places to bear the brunt of higher pricing or denial of coverage. There are certain diseases/conditions which are endemic to some places and insurers have to adopt an underwriting philosophy combined with risk management and risk reduction on continuous basis to improve risks or keep people healthy.

Health Insurance has a social need and changing regulatory scenarios across economies emphasize that health insurance be made available to all citizens and cannot be denied or discriminated. Insurers will have to implement risk management practices like carrying out medical screenings, conducting health and wellness campaigns for improving risks in such areas.

PG: Women and children constitute a large chunk of population that remains outside the health safety network?

SD: Some innovations do give me hope. Recently a parametric offering was introduced to protect women workers in the unorganized sectors, particularly working outdoors, from exposure to excessive heat. This is an unchartered territory which deserves to be looked at closely.

PG: Many thanks for these very informed insights, Dr. Deshpande.

This article is also published on the author's blog. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.