Cashless Health Insurance Settlement May Impact Insurers' Short-Term Cash Flow

The General Insurance Council's announcement of the 'Cashless Everywhere' initiative may have some impact on insurance companies' cash flow requirements in the short run, according to TATA AIG General Insurance Co.'s Rajagopal Rudraraju.

However, this will not have a material impact, Rudraraju, executive vice president and national head of accident and health, told NDTV Profit.

Announced on Jan. 25, the initiative allows policyholders to obtain cashless redressal of claims at all hospitals, irrespective of whether the hospital is covered under the network of the insurance provider.

However, the policyholder is required to intimate the insurer and hospital 48 hours prior, in case of elective surgery, or within 48 hours of hospitalisation in case of an emergency, to avail this cashless benefit.

In the short run, there would be a faster outflow since cash has a shorter day cycle for payment, said Rudraraju. But this should not make a material difference in the cash flows, as currently, too, out of every Rs 10 paid as claims, Rs 6-7 is cashless, he said. "So, in the short run, there will be quicker outflows by 30–60 days for the reimbursement portion... It will impact one short-term cycle."

The move is a huge positive for both insurers and customers, said Gopal Balachandran, chief financial officer of ICICI Lombard General Insurance Co.

Cashless facilities would enable a direct dialogue between the hospital and the insurer, as they would enjoy the benefit of first notification. This would help minimise the fraud that can come with a reimbursement claim. Overall, it would help in better pricing of health insurance products, he said.

Rudraraju also highlighted that grievances were far lower in cashless claims as opposed to reimbursement claims, and the level of customer satisfaction was way higher, on an overall basis, in the case of a cashless settlement.

Ultimately, the cashless reimbursement would, however, depend on the terms of the health insurance policy. In the event of any co-pays, sub-limits or deductibles, the customer would be required to pay as per the conditions and limits of his policy. However, the 48-hour prior intimation in case of elective surgery would help customers plan their cash requirement in accordance with their policy limits, Rudraraju said.

Watch the full conversation below

(Updates an earlier version to correct the TATA AIG General Insurance spokesperson's name)