Financial investment in Health Insurance

Reduce premiums by 18 % to 20% - Zone wise health insurance.

Do you know that health insurance premiums may depend on your city were you are living? Yes, there is something in the health insurance industry called "zone-based premium" which I will brief today in this article. For instance, the premium for a 45-year-old living in Delhi may be higher than a person of the same age living in Bangalore. In addition to age, the insured amount depends on the health conditions even the place mentioned at the time of health insurance purchased, will affect your premium.

Health Insurance Pricing based on Zonal wise

Below is an example of zonal pricing works while calculating health insurance premiums. The cities in India are breakdown into 3 high-level zones, defining by the Metro / Tier-1, Tier-2 and other cities (Grade 3/4). This is an list of zones (may vary from insurer to insurer)

Zone 1 - Tier I. Metro Cities like Delhi, Mumbai including Thane.
Zone 2 - Tier II. Such as Chennai, Pune, Bangalore, Hyderabad.
Zone 3 - Tier III. Rest of India, excluding areas falling within Zone 1 and Zone 2.

List of companies that provide insurance prices by Zone Below is the name of health insurance companies that use a Zonal-based pricing model.

• Max Bupa Health Insurance.
• L&T Health Insurance.
• Star health insurance.
• New India Assurance.
• SBI General Insurance.

Why do health insurance companies accept Zonal-based pricing?

Normally you will agree that expenditure in a metro city or tier 1 is usually higher than a tier 4 or relatively smaller city. Imagine someone being treated for a major illness in Mumbai / Delhi compared to a smaller town like Meerut or Akola. There are several reasons why this happens

• Higher room rental fees.
• Higher fees for diagnostic tests.
• Higher fees for doctors.
• Higher levels of stress.
• More susceptible to lifestyle diseases.
• Higher consultation fees before and after hospitalization

The point is that an insured person living in a smaller town will claim a smaller amount compared to an insured person living in a larger town, even if they both have the same sum insured and claimed for the same thing. Below is an example where we checked the annual premium for a 30-year-old to get Rs 10 lacs for 3 different cities from each zone. You can see how the premium always goes down by about 10% for Zone 2 and Zone 3 cities.

So you see above that the premium is as follows

Zone 1 (Delhi) - Rs 9862
Zone 2 (Pune) - Rs 9041 (9% less than Zone 1)
Zone 3 (Varanasi) - Rs 8201 (17% less than Zone 1)

So you can expect zone 2 prices to be around 10% lower and zone 3 prices to be around 10%. 20% less than Zone 1. This is for information only, see the policy documents for the exact differences. For this reason, a Zone-based premium valuation is possible. This is exactly why companies charge a lower premium if you come from a smaller town and vice versa. What if an insured person from a small town wants to take benefit of treatment in a metro city? Note that there are no restrictions on the city in which someone wants to avail treatment. In some cases, the policyholder may want to go to a better hospital for a larger city. In these cases, there may be some other policyholder who has to pay out of their pocket. As with some policies, if a policyholder in Zone 3 (smaller city) is treated in Zone 1 or Zone 2, there will be a clause of payment.

This means the claim amount of the insured person will not be paid 100% by the insurance company. For example, If a person in Zone 3 applied for Rs. 50,000 for medical treatment in Delhi will receive Rs. 40,000 (80% of the claim amount) and the balanced of 20% has to be borne by insured. This clause changes from company to company and zone by zone. The exact rules and clauses can be found in the health insurance documentation. In case, you do not want that co-pay applicable to you, then you can choose the city as any metro or bigger city which you prefer so that you can pay the premiums of zone 1 cities and at the time of providing the address proof, you can give any address.

Important points relating to Zone-based premiums

• In case you change the city in the future, you can always notify the company at the time-shifting and you will pay the bonuses according to the new zone.
• If you transfer your policy from one insurer to another, your premium may change depending on the old/new company pricing model. Zone-based pricing only changes premium fees depending on the city of residence. This will not alter any other policy benefits or features.
• Note that very few companies follow a premium domain-based pricing model, so ask. Conclusion.

Now you aware of the concept of the zoning, find out if there is scope to use it to your advantage. Please share the thoughts about zone-based premium pricing?