Acko Insurance Review

Recently, a friend of mine came down with pneumonia. As a result, he had to take a little trip to the hospital. While he likes to say that he enjoyed the “seva” he received during his stay. He had a different flavour in his mouth about the financial aspect of the whole situation.

You see, this friend of mine, let’s call him… let’s stick with “friend” (I’m bad at names), had finally decided to get himself health insurance to save his finances from this exact scenario. A hospitalization out of the blue that would be covered, thanks to some financial prudence on this friend’s behalf.

But guess what, there’s a villain in this story, a faceless, shapeless villain named “the waiting period”. Dramatization aside, the waiting period meant that he had to wait for at least 30 days after buying the policy to be avail of any of its covers.

Another blow to his metaphorical guts came in the form of the fact that the insurance company wasn’t going to cover his hospitalization expenses for this visit anyway! Irrespective of the waiting period, the actual costs he incurred during his visit were less than the “deductibles” of his insurance policy, which meant the entire cost was to be incurred out of his pocket.

So what is the point of getting a health insurance policy, if the insured party has to bear the costs anyway? Let’s find out.

Waiting Period in Insurance

The waiting period is the time from the purchase of the health insurance policy, for some days usually extending above 30. During this period, the policyholder cannot avail of the insurance company's services to cover the medical expenses mentioned in the insurance contract.

This waiting period aims to deter the policyholders from engaging in trivial hospitalizations right after buying the policy. As such a hospitalization would violate the Principle of Loss Minimisation in insurance.

The Principle of Loss Minimisation states that the insured party should take care of the insured asset as they would in the ordinary course of business. The insured party should not be reckless, negligent or irresponsible with an asset, just because the said asset is insured.

This is why a hospitalization, just for the sake of its expenses being covered by insurance, is deterred by the company through a waiting period.

The compulsory waiting period for almost all insurance providers is 30-90 days from the date of purchase of the policy. For pre-existing medical conditions, the waiting period is 1-4 years from the date of purchase. Different providers also have a list of specific diseases with a waiting period of 1 year. The list of specific diseases differs based on providers.

Some providers also cover maternity benefits but have a waiting period ranging from 9-36 months.

Deductibles and Co-pay in Insurance

The purpose of deductibles or co-pay in an insurance policy is the same as the waiting period. It is to discourage policyholders from incurring unnecessary hospitalization costs. Deductibles and co-pay are parts of the insured amount that the insured party has to pay.

Deductibles and co-pay make the insured party contribute to their health care service, making them value hospitalizations as a necessity to help them and not as a fully paid luxury service.

Deductibles and co-pay differ based on the frequency of their payment. While a deductible in insurance is an annual fee payment, co-pay is a percentage of the hospitalization costs that the insured party has to pay every time they avail of any healthcare service covered by the policy.

Thus, an insured person may incur only the deductible if there are no hospitalizations in a year. On the flip side, the insured party may end up paying more in the form of co-pay if there are more than a certain number of hospitalizations in that year. Deductibles are a compulsory payment, while co-payment is necessary only when availing of healthcare services.

Digital Health Insurance without Waiting Periods or Deductibles

Based on what we’ve read so far, the waiting period and the deductible/co-pay are genuine features, put in place to safeguard the insurance company's interests. Thus, it would be unfair to look at these features as hindrances. If the company didn’t put in these features, they would be running at a loss, which in turn would harm us, the policyholders.

But these very features were the reason for my friend’s inconvenience as well. This is why it would be a safe bet to assume that insurance without these features would be immensely appreciated by people as well.

And wouldn’t you know it, such health insurance does exist. Acko Insurance provides affordable health insurance without having to deal with the hassle of waiting periods, deductibles, or co-pays.

Acko Insurance is an Indian Insur-Tech company founded in 2016 by Varun Dua. The company turned into a unicorn in the year 2021, making it the 34th company to join the unicorn list for the year.

The company provides vehicle, health, and electronics insurance based on a fully digital platform. Some of its benefits and drawbacks are as follows:

Benefits:

• Acko promises no waiting period and no deductibles during the claim procedure. This means that even pre-existing conditions will be covered from day one of the policy period. The only requirement is that information regarding said pre-existing medical condition be conveyed to Acko during the insurance purchase.

• The process of buying and claiming the insurance policy is entirely online. This allows prompt submissions and review of buyers’ information and quick disbursal of the claim amount. Acko also boasts a health insurance claim settlement ratio of 97% (as claimed by Acko’s website).

• Being online also allows Acko to be paper-free and cash-free. This gives policy buyers and holders access to a hassle-free insurance purchase and disbursal process.

Drawbacks:

• The platform’s online presence comes at a cost to the company as well. Providing any service online in India runs the risk of low adoption due to the aversion of the older population toward the digital medium. Since health insurance is a necessity for all ages in the country, the company runs the risk of losing out on a significant part of the population in the form of older generations that might need a more personalized experience with recommendations and some amount of hand-holding.

• The promptness of the online submission procedure also leaves no room for correction of information. Insurance works on the principle of Uberrimae Fidei, or Utmost Good Faith. Any disparity between the actual and submitted information violates this principle and may void the policy contract. This safety precaution may end up taking accidental submissions of incorrect information as an intentional attempt at fraud.

The Bottom Line

Buying insurance is a prudent financial habit that is best started as early in one’s life as possible. With the advent of technology, many providers are moving to a fully digital presence which is a good direction going forward. Still, complete abandonment of the personal model might not be the greatest idea for the time being.

Would you buy insurance if it was entirely online? Or do you prefer the person based model more? Let us know in the comments below. Also, feel free to suggest topics you would like to see covered in future articles.

Until then, happy investing.