Medical and Health Insurance provides the alternative

Alternatives never really existed until recently with the innovation from insurance companies as they used the gaps created in the medical aid market as a means to reduce costs, to create insurance cover for medical events.

As the insurance industry is not regulated by the CMS but the Financial Services Board (FSB), which implements and governs insurance principles, insurance companies don’t have the difficulty the medical aids do in underwriting their risk pool. Although many people feel that insurance is a grudge purchase and is unethical, it is not the fault of the principles of insurance, but rather the ineffectiveness, whether purposeful or not, of the client facing representatives.

Insurance principles are very simple and work off three basic rules:

1. The risk must be an uncertain event – unpredictable and not guaranteed.
2. The collective needs to have a big enough exposure to uncertain events.
3. There needs to be a means to pool the risks so that the collective can cover the individuals who are affected by the uncertain event.

Taking these 3 rules into account, how then is Medical Insurance revolutionising the healthcare sector?

Well there are two types of insurance: short term and long term. Short term insurance is also known as indemnity insurance and its aim is to ensure that you are in the same position after an unpredictable event as you were before it. Short term insurance, therefore, covers the costs resultant from the event, within certain stipulations and guidelines.

Long term insurance is insurance that provides a stated benefit or benefits for a member in return for an underwritten premium based on each members risk profile.

If we return to the rules of insurance, we can now see how new insurance products are developed: If there is a need to protect or cover people from an event and there are enough people exposed to that risk, then invariably an insurer will develop a product to meet that need.

And this is precisely where medical insurance stepped into the picture. There are deficiencies in the medical aid market due to legislation and regulation and, as it nears the end of its death spiral, these deficiencies are as exposed as their declining risk pool.

With the ability to underwrite the risk pool and without being forced to prescribe to the same legislation that Medical Aids do, Medical Insurers are able to calculate premiums based on cost of defined benefits versus the exposure of the risk pool and are therefore able to vary premiums for each member.

At Affinity Health, we have taken this a step further and created a network of medical professionals with whom we can negotiate rates and represent both the interests of the medical professional as well as our members through our case managers. This allows us to provide a seamless, managed experience for all parties.

We go to great lengths to explain to our members that we are not a medical aid. We also explain exactly what their premiums give them in terms of cover, so they can adapt their cover to suit their needs or their budget. No one will ever know a persons’ medical history better than themselves, so our members are, through the advice of our representatives, encouraged to ascertain their own risk level and therefore tailor make the benefits on their cover as per our stated benefits and drug formulary.

Medical insurance in South Africa has not only gone a long way to plugging holes in medical aid deficiencies, but it has also opened up private healthcare services to a wider audience due to its affordability, yet it still operates with the understanding that for any project to be sustainable it needs to be implemented with sound economic principles – and it is the ethical and moral code written into the governance manuals that determine the longevity of an insurance company.

You can’t regulate morality, but you can bring morality, ethics and economics together to provide to a need – that is true sustainability.

Why do we love to hate our Insurance?

Every time I sit down for a coffee with a colleague, friend or associate, the conversation invariably leads to a mutual distrust and dislike of the insurance industry – ok not every time, but pretty often. I have often wondered why we feel so hard done by when it comes to insurance and the multitude of products that are sold to us as a way to protect us from the perils of daily life – we humans really do battle, how we survive is anyone’s guess.

I sat down with Murray Hewlett, CEO of Affinity Health and asked him some hard questions about the insurance industry…

MH: We created Affinity Health to fix problems in the medical aid and medical insurance industries.

Medical aid is seen as too expensive in South Africa and medical insurance has a problem as it is an agreement between an insurer and the policyholder which doesn’t guarantee you admission into a medical facility. Generally you can’t claim until you know an amount, and you don’t know an amount until you have spent the time in the facility – this creates an ethical dilemma and a gap in the market between medical aid’s expensiveness and medical or health insurance’s inability to accept a claim. This is where Affinity Health stepped in and provided us top quality medical funding and amazing service.

MH: Medical aid is indemnity cover against medical expenses. In theory they cover you for all your medical expenses, but in practice they don’t. Medical insurance in a defined benefit cover, example, if you go for a appendectomy, we’ll pay R 30 000.00, if the cost is R 25 000.00 you score, if it’s R 40 000.00, you have to find the difference.

All the benefits are pre-defined whether it is a surgical procedure or days in hospital, which means that the member knows what they are going to get and can then manage those expenses accordingly and can even negotiate with the facility based on those pre-defined amounts and in fact we’ll negotiate with the facilities on their behalf through our case managers.

Medical Insurance silo?

MH: Customer service, great premiums, having the ability to have our members admitted into a medical facility and having a national network of Doctors, Dentists, Pharmacists, Radiologists, Pathologists and Optometrists.

MH: I don’t think there is lack of trust, I think that it is just indicative of a market that is hyper competitive. We have seen the same for the cell phone companies, the banks and the same in the insurance space over the last 20 years. Churn is important because it allows insurance companies to compete with better and better products. If you look at South Africa’s insurance environment versus global insurance markets, due to our competition our products are first world and better. The competition is good for the consumer because it drives prices down and benefits up.

MH: We spend a lot of time educating our customers about how the product works and why it works. This creates realistic expectations. One of the biggest reasons for insurance policy cancellations is people buying products that they don’t understand, creating unreal expectations, so when the product doesn’t deliver on those expectations, the customer cancels the policy blaming the service or product provider.

http://www.popi-compliance.co.za/ has gone quiet. Everyone, especially the public seemed so excited by its sign off in parliament; finally the public had a way to get back at these spammers and hold them accountable; but an age seems to have passed since then and it feels like its business as usual for the corporate culprits – how will the POPI Act affect insurance companies like yourselves if at all?

MH: The POPI act is designed to protect the consumer against unsolicited marketing from a digital perspective. We’ve seen from overseas cases that opt-in regimens do not offer the consumer more protection, all they do is increase the price of marketing which is then passed down to the consumer with more expensive products, so we don’t see POPI having any effect in digital marketing in the country in the long term.

MH: POPI is designed to protect the information from getting into criminal hands rather than to stop people from receiving marketing information.

Every time the DMA advertises the OPT out list, they don’t receive an increase in opt out requests, it makes humans feel disconnected. Most people would want to be able to choose which types of messages they receive as opposed to being completely opted out, so knowing which people want which type of information is key, of course, though, how do you know that unless you ask?

MH: We ensure that all complaints are answered no matter where they come from: Hello Peter, Facebook, e-mail etc…we do spend a vast amount of time and energy ensuring that our customer service goes above and beyond expectations.