4 reasons why you should avoid Health Insurance policies from Banks with cheap premiums !

Do you come across health insurance policies from Bank with surprisingly low premiums and with amazing features and benefits , which makes you feel you should not miss this offer ? Today I will give you good enough idea about those health insurance policies and will help you understand the limitations of those health insurance policies from bank and why you should avoid them in most of the cases. Lets start.

Health Insurance from Banks

Background about Health Insurance policies offered by Banks ?

All the health insurance policies offered by banks is mainly a group health insurance cover provided to all their banking customers in association with some external general insurance company. What happens in this case is that a health insurance company approaches a bank and tells them that they can offer a specialized health cover to all their bank customers with lots of benefits with a small premium. The best part of these policies are that there is no medicals involved , there is fixed premiums for all age group customers, very low premium etc etc . On first look, you will not even believe that some thing of that kind can exist.

But there is always another side of the situation and now these policies despite looking amazing have lots of problems and limitations which you should know and then take the decision. Lets check them one by one

1. Depends on negotiations every year

Health insurance policies provided by banks are actually an outsourced thing . So if you buy it from bank A , then actually its a policy from Insurance company B, bank is merely a intermediary. As this policy is a group cover, the policy premiums and all the featured are going to be negotiated on a regular interval like each year or twice a year. Now the problem is that if the health insurance company feels that the premiums should be revised (for whatever reason) , then banks cant do anything and only customer will suffer here because he did his long term health insurance planning with this policy.

The premiums of the policy can rise like anything in future, because the pricing of the product is very flawed in most of the cases because banks do not have much experience in health insurance domain.

In absence of the right expertize with most Banks, the pricing could be majorly flawed. Though there are no published figures available, our sources at some Insurance companies say that it is an incessantly “bleeding portfolio”. We believe, any contract, in any field, which is not win-win,does not work in the long term.

2. Chances of association breaking in future

What will a customer do if the association breaks between the bank and insurance company in future ? Health care costs are increasing and its always a good thing to get your self insurance as soon as possible, now if after 5 yrs of running a policy suppose the association breaks, a customer will be left into a situation where he has to again find a suitable policy and who knows if he has developed some illness in between these 4-5 yrs, who will cover that. Here is a real life experience from Ketan shah on forum, see how he suffered when something similar happened with him

Dena bank 5 Years back came out with Scheme in tie up with Oriental Insurance for providing mediclaim at highly attractive premium i.e. Rs. 7000 for 5 Lac cover.

We hold various accounts with dena bank and as per their tie up we got ourselves covered (5 Policies) after paying 2 years premium, when the 3 rd year renewal came we were informed that the tie up with Oriental is no more there and the same policy will be transferred to United India Insurance for same Premium..

Now we have paid 2 years premium with United India and the 3rd year Premium we are informed that Dena Bank has increased the Premium 2 -3 fold for policies…

Now trusting Dena bank and paying 5 years of Premium which comes to almost 2 Lacs we are stranded and forced to pay high Premium for my parents and now we are in a fix If we don’t pay and we cant even change the company since parents are 65 +

we were assured that the scheme shall continue since it is bank tie up and therefore we got our previous pvt policy cancelled which had a very High Premium for my Parents (20000 for 5 Lac)
Please advice if we can approach IRDA for the same…

3. Limits on renewable age

Health insurance is a long term financial product and should always be bought with very long term benefits in mind. Having a life time renewal option is not just a wish, but kind of must have feature in your health insurance policy and that’s where these policies from banks fail. They all have limitation on renewal age in most of the cases.

Even if the premiums are lower, what will you do sometime in future when you really need that policy and it shuts the door for you.

4. Pathetic “service” issues

The service provided at the time of claim settlement is really a big parameter. Now if you have bought it from bank (here bank is the agent) , there is no “person” or “company” to help or assist you at the time of claim settlement ? Whom do you mail ? Whom to you talk to ? Who will you catch ? Who will you blame ? The bank due to their size and nature will not entertain you in proper manner.

Also being a group policy, it some times gets very complex to understand their limitation and many things will be a complete nightmare for you as customer. So its really a big disadvantage here . I want you to go through the following conversation on service issues which was done by Mahavir Chopra of medimanage and Ritesh sometime back . It will give you some idea on this aspect.

Bad Service in health insurance by banks

Overall I would say any health insurance from banks which are pure group cover should be just an extra health cover in your life. It should NOT be the primary long term solution for your health insurance needs. Its very important to have a large health cover from a very strong company with great benefits and strong service levels.

What do you feel ?

Want FREE HELP in buying right health insurance policy for you ? Get Free Help Now


By Manish Chauhan on July 4, 2013 · Posted in Health Insurance

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61 Comments | Post Comment

Amit Shah says:

I am not Agree with your Opinion…As per the Terms and Conditions of PSU’s is very clear. NIC Policy is Work with BOI Last more then 5 years without Issue, Maximum Client is take benefit of this policy.

Posted on July 4th, 2013

Dr M.Chandrashekhar says:

I tend to agree with you. Since the last 03 years, Iam having Max Bupa Gold ( Iam 60 yrs old) Though the premium is steep, the Services are very good & claims are passed promptly.

Posted on July 4th, 2013

Muthu Krishnan V says:

My parents have taken New india assurance individual policies ten years back through citibank credit card. We have made 3 – 4 claims and they were processed. for one of the claims, I made it through my company group policy which was rejected but on submitting the claim to NIA, they cleared it after asking for more documents and doctor testimonials.

Posted on July 4th, 2013

K.A. Umamaheswaran says:

Thanks for the important message. i am also an agent for LIC and New India. I always take care of my customers very well . I am spending maximum time to get my customer’s claim passed.

Posted on July 4th, 2013

Ram says:

What about 4L coverage for 100 INR by SBI? Does it falls under same category?

Posted on July 4th, 2013

Manish Chauhan says:

Yes

Posted on July 4th, 2013

gaurang says:

are its personal accident calim .. when u died it will give benefit and if u lost bil lower limb or upper limb u will get banifit of full your summassured

Posted on July 4th, 2013

Vanga Rajendra Prasad says:

SBI General Insurance of Rs 4 lakhs for RS 100 premium per year covers Accidental death only, but not disability now.

Posted on July 4th, 2013

Chander says:

Dear Manish:
The salient issues and problems have been brought out crisply — “seducing customers in the beginning”, banks’ ignorance, premium increase with impunity, long term customer-commitment.
Would like to share some + and some – of my experience.
I have a SBI Card – Royal Sundaram tie-up Health Policy for more than a decade. The experience has been excellent. Prompt services; no hassles; not cheap as one example above — but not costly too. Premium can be checked online and compared. Very good customer service too — chat, email etc; but for some not so well trained people sometimes. Takes away a lot of time in getting your query answered properly/ correctly. Many a time I have got good advice and suggestions too. Depends upon the luck to whom you get connected at Toll Free!
Problems: Although Govt. has tom-tomed the increase in age to 70 of Senior Citizen Mediclaim cover; you cannot change the Insurance company. That is you can’t start a new policy with a company if you have crossed 60!
—————————
1) Grievance redressal by the Insurance Companies is a pain; as there is no clear mechanism spelt out. And all of them hide behind BPOs.
2) It is time IRDA makes it mandatory to disclose the terms and premium on the web-sites.
3) May be there should be a responsive “health-insurance” ombudsman.
————————————————
Overseas Travel Health Insurance is another magical world by itself. Worth researching! Can share experience sometime.
————————————————-
You should also write a future article on Banks as intermediaries for ULIPs and MF too.
I had/ am having miserable experience with a Dhanalxmi Bank-Metlife (now renamed as pnb-metlife in India)!!

Posted on July 4th, 2013

manojkumar pandey says:

very useful artical for all.

Posted on July 5th, 2013

Manish Chauhan says:

You might have got good service , but then you are rare . What I said in article is true for most of the policies, now if your bank association with the insurance company has been great . You are lucky :) . But all the risks points I mentioned still hold true . Thanks for sharing your experience on this

Posted on July 5th, 2013

Manish Chauhan says:

Thnaks

Posted on July 5th, 2013

Manish Chauhan says:

Yea accidental cover is anywyas very cheaper !

Posted on July 5th, 2013

Manish Chauhan says:

Nice . Thats a great thing to hear !

Posted on July 5th, 2013

Manish Chauhan says:

Thanks for sharing . The post does not mean to say that you do not get your claims, it only wants to highlight the risks involved !

Posted on July 5th, 2013

Manish Chauhan says:

Yea , thats what you get in high premium

Posted on July 5th, 2013

Manish Chauhan says:

But is it true for all the banks ?

Posted on July 5th, 2013

bemoneyaware says:

Great article
We need to remember that there are no free lunches in life. If anything is costing less than elsewhere we need to be extra careful and try to find why is it so cheap!

Posted on July 5th, 2013

Manish Chauhan says:

True !

Posted on July 5th, 2013

dr teny says:

dear manish
i had a syndicate bank plus united india mediclaim. i am using it for the past 9 years . had 3 to 4 small claims so far .so far had no problem.if some problem is there we can contact united india or tpa
.premium is much lesser than other banks too.
as u have told if bank stops the policy we will be in a grave trouble as my parents crossed 70!!
thanks for your post and insights
dr teny

Posted on July 5th, 2013

Sachin Shah says:

Manish,

again a good article. i m regular visit your blog and learn all the thing about insurance and investment. for your information i m agent of LIC and APOLLO as well.
i share your article with my clients and its very much helpfull for me. i hope you don’t mind if i copy your article and share with my clients.

Posted on July 6th, 2013

vrknair says:

I have two mediclaim policy of BOI and Star Health (3330 and 13000 respectively) I want to stop that BOI policy and shift this star health policy to the Apollo. Two yearly premium paid so far. Pl guide me.
When started it was only 9000 this year they charged 13000. I do not know why the premium increased?

Posted on July 7th, 2013

Rakesh says:

I do not subscribe fully to your views on buying health insurance through PSU banks.
I am an account holder in Canara Bank and have an mediclaim policy of United india insurance through my bank since 2007.In all these years there were four occasions when my wife needed hospitalisation.On all these occasions i got hasselefree cashless
services from my TPA
In all these years i never had to renegotiate premiums,and this continues to be same
except minor enhancements because of changes in service tax by govt.
I am a 64 years senior citizen and i can renew my policy upto 80 years.
Yes i agree that problem may arise if this tie up breaks in future

Posted on July 9th, 2013

Manish Chauhan says:

Yea .. that what we are talking about . If it has gone well , great . but you always have these risks.

Posted on July 15th, 2013

Manish Chauhan says:

You can never know that, companies are free to do that .

Posted on July 15th, 2013

Manish Chauhan says:

As far as you are sharing it in email and telling them about the source (jagoinvestor.com) . I am fine with it !

Posted on July 15th, 2013

Manish Chauhan says:

Yea , that risk is always there !

Posted on July 15th, 2013

raj says:

Dear Manish,

We have been reading your articles for a long time. But Sorry to say – for the first time it seems You have been misguided or you have not thoroughly researched about the contents of this article.

Will reply point wise as in your article:-
1. Depends on negotiations every year- Wrong
My whole family and group of friends have in total 23 SUCH Policies!
NEVER-EVER premium have been arbitrarily hiked. It is much less than Individual Health Policies. You can always check.
2. Chances of association breaking in future- True
And in reality has happened only with 3 of our policies. But every time some other Insurance company ties with the Bank and the Customer is saved. Do agree it could be a problem. Even then Insurance companies allow switch over from group insurance to individual health policies. You can check this. As for insurance company this is a very large cohort and a money too.
3. Limits on renewable age- Partially true. As now few companies cover upto 85 years of age. This is quiet good considering the cost.

4. Pathetic “service” issues- Partially agree. We occasionally had problem/s but these may be similar to other individual health policies.

I discussed about this article amongst most – In my Family and Friends and We feel the benefits including the monetary far outweigh the drawbacks.

These policies are beneficial for all except Agents as they don’t get anything.

Will like to add the savings that we will make from individual policies along with regular hike in premiums will be sufficient to take care of ourselfs in case live beyond that age after 30 years.

Posted on July 17th, 2013

raj says:

Actually my age is 54 and I’m saving maximum. I pay Rs. 6990/- for Rs. 5 lakh SA for 5 persons. And in a family floater plan I need to pay Rs. 63234/- per annum for the same SA without any loading!

Posted on July 17th, 2013

Manish Chauhan says:

Raj

You have a good case, but its like the Black Swan thing . JUst because your case has been amazing, it does not mean its a general case. Its your case . There are tons of other cases where people have suffered because of bank policies. And some of the issues which you have accepted in your case , like “renewal age limit” , Its going to be really a big disadvantage, which weighs down other factors by a big margin.

Manish

Posted on July 18th, 2013

Sundaram says:

How about seeing it from the point of view of Insurance Companies especially Four PSUs.
They are actually loosing money or making only small profit. However Govt. will not allow them to go out of this business. So for their own survival, they are offering such discounted product hoping on majority no claims. If you try for a senior citizen health insurance with these PSUs they will discourage you (my own experience).

So these discounted policies may still offer some value to say 50+ category at the cost of younger folks.

This is probably best Medicare safety net available in India for lesser previleged. One should use it.

Posted on July 18th, 2013

vrknair says:

SBI and you got good service!
I cannot believe my ears.
You might have some friends there who knows you.
I have salary account with the SBI still I did not get any benefit from them even to get a housing loan ( I took it from Syndicate Bank) State bank is 100% customer un friendly I repeat 100% customer UNFRIENDLY. I say this from personal experience/
Go to any SBI manager he will not even offer you a seat what to talk about helping.
May be I am educationally more qualified than him or drawing more pay than him but once in the chamber his behaviour is 100% against the customer.
They know they have union to support. Whatever they do union is like a devil, will support them so Govt also can’t do anything.
Actually my opinion is that govt should close all these in efficient PSBs. They make loss always still Govt capitalise them with the tax payers’ money. For what? To save their job at the cost of the customer and the poor rural Indians
What a pity indeed>

Posted on July 20th, 2013

Manish Chauhan says:

Thanks for sharing your story and experience. But we are sure various people will have their own story and their own version !

Posted on July 20th, 2013

Manish Chauhan says:

But I am not sure why you are looking at it from this point. Its a group cover and thats what it costs most of the time. The pricing reflects the value. True that if one can not afford another policy at high cost, one can go for these

Posted on July 20th, 2013

Munish says:

Hi Manish,

Before I was getting health insurance from my company for all family members but now I start my own business so I want to take one of the best health insurance for us so please guide me which will be the best for us.

Posted on July 20th, 2013

Nagaraja Sirigeri says:

The discussions and sharing are very nice and crisp. Lots of experience are shared which is valuable for many viewers of this topic.

I am a financial consultant i believe in providing best possible service and being supportive at the time of issues and claims. And that builds my business automatically through word of mouth.

Its very true when some of the policies are bought online or through banks and not serviced properly. The employees are made responsible for sales but not proactive in the services part.

That’s were it leads to discomfort to the investors or policy holders.

I always suggest to people to buy your policies with people who are in serious full time business and supports their clients at times of claims.

Posted on July 20th, 2013

Manish Chauhan says:

True :)

Posted on July 29th, 2013

Manish Chauhan says:

There are many companies now like Religare Care , Appolo Munich !

Posted on July 29th, 2013

Salm says:

Manish,

I found many drawbacks to individual policies as it come with many conditions for the first few years such as pre exising is not covered, few of the diseases are not covered first 3 years and so on….

In that case, being a part of a group insurance coverage, preferably from your
company ( employer) would be much beneficial. Here company can negotiate the terms and conditions and most cases, insurance companies remove all the conditions and offered coverage right from the day one instead of no coverage for first 30 days or no coverage up to 3 years for selected diseseases etc like in the case of standalond individual policies.

More over, some companies even cover maternity benfits in case of group health coverage where as in individual policies, you will not get that benefit.

In my opinion, you get far batter quality claim settlement service in case of group coverage because it is a matter of premium that amount to few lakhs or crores which any insurance company cannot afford to loose if they don’t service better where as in case of individual policies losses are very less if a policy holder switch over to another company. In case of individual policy, we need to take initiative along the process with the agent or insurance service personnel to get things done while in case of group coverage the process is very simple, you just need to interact via your HR personnel and you get far better and prompt service without much hassle! That is the fact.

Salm

Posted on July 31st, 2013

Edward says:

Manish,

Professionally written post on Medical Insurance schemes offered by Banks,

However i will have to differ in its totality for its biased approach favouring agents and private banks.

My Justification Supporting such schemes

1. Only Nationalized Banks are offering such schemes
2. Only Public sector Insurance companies are offering such schemes
3. United India,New India, Oriental Insurance,National Insurance have very High claim settlement 95%,93%88%&74% respectively
4. The Contract is between the person Insured and the Insurance Company, the bank is just a mediator
5.Agents receive 15% commission on open market medical schemes at the inception as well as on every renewal
6.My family, relatives and friends own atleast 30 policies from Canara Bank/United Insurance and Syndicate Bank/United Insurance and do not regret a single moment for going for it.
7. The Media-Private Banks-Agents Mafia have made sure that public are unaware of such life saving low cost schemes.
8. My entire family and extended group of relatives and friends numbering 50 highly recommend bank provided schemes

Just Go For It !!!

Posted on August 1st, 2013

Manish Chauhan says:

I have just outlined the possible potential risk points . It might be true and false in many cases. At the end customer has to take his decision

Posted on August 5th, 2013

Manish Chauhan says:

Group cover are surely going to give many benefits compared to individual or family floater policies, If you are able to make sure that you have them for life time, then go for it .

Posted on August 5th, 2013

YASHDEEP says:

Its accident policy and not health insurance.

Posted on August 9th, 2013

Rahaman says:

Manish,

While doing some analysis on the same topic, I came across this http://www.gettingyourich.com/1/post/2012/11/why-health-insurance-offered-by-nationalized-banks-is-an-attractive-option.html
[Please note that I am not sure if it is good etiquette to refer other blogs in your blog, so excuse me if it looks bad:( ]

Now, I have a health insurance policy from National Insurance Company through Bank of India (BOI National Swasthay Bima Policy) & the policy is issues in my name. My questions are

– You are mentioning such insurance policies through banks are group insurance, but in my case the policy is issues on my name. It is then an individual policy or a group policy?

– For the payment, I submitted the filled form to BOI & then BOI paid the premium by deducting the amount from my own account. But for further follow-up, I need to talk to insurance company directly, there is no person/agent from BOI

So, could you please help me with some thoughts like is it an individual policy or group policy? Does it depend on BOI’s association with the insurance company?

Posted on August 16th, 2013

Manish Chauhan says:

Its a group policy. But you are the customer . It will be in your name . Its just that the nature of policy is different. You are part of a big contract which is for all the customers .

ALl the risk points which I have put applies to you , the good thing is that none of them have happened and might not happen. But just imagine if the association breaks and then you are left without any cover. What do you do then ?

Posted on August 21st, 2013

Manoj Negi says:

Hi
Sir, I am a regular reader of jagoinvestor and as after reading this article I want to buy a health insurance policy. I am 38 years old. I want to a buy a family floater health insurance for my wife (35 years) and 1 daughter (6 years). Please suggest me a family floater health insurance for 3 lacs.

Thanks & Regards
Manoj Negi

Posted on August 23rd, 2013

Manish Chauhan says:

Oriental or Religare is a good choice !

Posted on August 29th, 2013

feroz ahmed says:

Hi
Sir, I am a regular reader of jagoinvestor and as after reading this article I want to buy a health insurance policy. I am 34 years old. already family floater health insurance for 3 lakhs i want to buy family or me for 5 lakhs or more i need multiple health insurance to dupilcate copy claims insurance. i have max bumpa 3 lakhs i am over weight for me i try to one more health insurance Please suggest help me

Posted on September 6th, 2013

Manish Chauhan says:

Hi Feroz

What do you mean by you want to duplicate claims ?

Posted on September 7th, 2013

feroz says:

one claim direct hospital and other claim cheque amt

for example Royal sundarm hospital plan Day 1 = Rs 1,000 per day

i have 10 days hospital 2 lakhs clam max bumpa
royal sundarm 10 days = 1000*10=10,000+ICU 2000*5=10,000

Posted on September 16th, 2013

feroz says:

I NEED BEST PLAN HEALTH INSURANCE 100% CLAIM FAMILY FLOATER 10 LAKHS WHO BEST PLAN

Posted on September 16th, 2013

Manish Chauhan says:

Whats your question ?

Posted on September 17th, 2013

punit says:

dear sir
i have to invest some amount for my child,s education who is 2 years old on monthly basis.(approx 1000 per month). kindly suggest..i am confused about child education plans.

Posted on September 26th, 2013

Manish Chauhan says:

This article will help you http://www.jagoinvestor.com/2012/02/create-best-child-policy.html

Posted on September 30th, 2013

Manish Chauhan says:

Not an issue Imran

Everyone is free to take their own decisions, based on their understanding . We just give our views on a topic. Btw, which point above do you think is not correct ?

Posted on February 25th, 2014

Imran khan says:

Manish,
I was not saying you put any wrong information in the above article.
I am just saying as per the comments posted by the user and my personal experience with the bank health insurance , my perception about health insurance provided by the Bank is not bad in term of premium and some time in term of service too.
One more thing M also oppose the bank health insurance so don,t take this negatively.

Posted on February 27th, 2014

Manish Chauhan says:

Bank Health INsurance is a good thing provided one has not been able to get a proper health insurance. This is what I have got the conclusion

Posted on March 2nd, 2014

Praveen says:

Dear Manish

I have taken a health policy (Jeevan Arogya) from LIC. My mother was also covered under this plan. After 12 months from the plan my mother has to go for Angioplasty in Fortis Escorts, Delhi. When I met HI Manager he told me that only 40 % of SI for angioplasty will be paid which was not cleared at the time of taking policy. Request you to show the path shall I go for grievance redressal to IRDA or any other option is feasible. Still the claim is not settled it may take 10 to 15 days extra. Please guide me

Posted on May 1st, 2014

Manish Chauhan says:

What is written in the policy Brochure ?

Posted on May 7th, 2014

Raj says:

Very useful article. Thanks a lot for sharing.

Posted on October 3rd, 2014

Manish Chauhan says:

Welcome !

Posted on October 16th, 2014