Daybreak - Nothing's coming in the way of Star Health's recovery. Not even angry customers

Episode Date: August 17, 2023

A March 2022 report from the World Health Organization said that over 17% of households in India incur catastrophic health expenditures every year. And it results in the impoverishment of around 55 million people. Anyway, it's just about 37% of the population that actually has any form of health insurance. In such circumstances, if the rate at which a health insurance company denies claims begins to rise, it is a matter of concern. Star Health, one of India's leading health insurers, had the highest number of claims outstanding among the standalone health insurance companies for the year ended March 2022. Aggrieved customers have been running from pillar to post for payouts, turning to social media and consumer courts for respite.And yet, Star Health's new business is still growing and its retail policy renewal rate remained unaffected.Tune in.Recommendation:IPO-bound Digit trusts its tech to sell health insurance, but consumers don’t yet Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me. My interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Imagine if your health insurance company was to take the call on whether you need to be hospitalized or not. It is a scary thought, right? Because that decision only and only belongs to a.

doctor. But some health insurance companies think that it is their decision to make. Granted, that the insurance business, by its very nature, requires these companies to scrutinize our medical records, but there is a line, right? Take the case of Amit Kumar Goyal from Gujarat, for example. He had to be hospitalized after he contracted a viral pneumonia and COVID-19. His lungs were 25% infected. But his insurance company's Star Health? Shot down his claim. And what did it give as a reason? It said that hospitalization was not required in a case like Amit Kumar's. Now, in a country like India, we all understand how critical health insurance is. Without it, medical expenses can go high enough to push people into poverty. A March 22 report

from the World Health Organization said that over 17% of households in India incur catastrophic health expenditures every year, and it results in the impoverishment of around 55 million people. Anyway, it is just about 37% of our population that actually has any form of health insurance. So, in a situation like this, if the rate at which a health insurance company denies claims begins to rise, it is a matter of concern. So much so that it was even raised in Maharashtra's legislative assembly by Congress party leader Nana Patole. Patole urged the state's chief minister to look into the serious issue where the public is being looted. And the only private company Patole mentioned was Star Health. See,

Customer complaints are not that rare in the health insurance industry. But Star Health, which happens to be one of India's leading health insurers, has been doing particularly bad in this regard. Especially if you take into account that it has covered over 170 million people since its inception. We are hearing more and more instances of customers complaining about the company denying their claims. In fact, Star Health had the highest number of outstanding claims among stand-alone health insurance companies for the year that ended in March 22. Welcome to Daybreak, a business podcast from The Ken. I'm your host, Nickda Sharma, and I Don't Chase the News Cycle.

Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Friday, the 18th of August. As it started out in 2006, Star Health has grown to be a leading market player in India's standalone health insurance space. It has over 32% share in the retail health market in the country. It went from a business with a small rented office in Chennai to a giant now with a market capitalization of nearly 37,000 crore rupees or more than $4 billion. But just like all other. insurance companies that were left battered by the pandemic, Star Health 2 suffered the same fate.

It posted losses of over 1,000 crore rupees in both 2021 and 2022. The company also went for an initial public offering or IPO during the pandemic and it did not go very well. It was undersubscribed and the shares were listed at 845 rupees per piece in December 2021. This was at a nearly 6% and discount to the IPO price. The stock continued falling till June this year before it actually began recovering. But while its financial numbers are looking better, the number of angry customers who have been denied claims or given less than what they think they deserve has also increased.

The Ken reporter Koshal Shroff decided to find out more about these cases and what they could mean for the company's path to recovery. Stay tuned to find out more. In the case of Amit Kumar Goel, the consumer court in Gujarat held Star Health liable for serious negligence, unfair trade practices and deficiency of service. The court directed Star Health to pay Amit Kumar his claimed amount, along with a 9% interest and an additional $3,000 for mental harassment. Yes, for a company the size of Star Health, this penalty is next to nothing. But such rulings can dent its image. In fact, they already are.

Another such example is of Omprakash Dvedi, a 60-year-old retiree from Sultanpur in Uttar Pradesh. He had a similar experience when his wife was admitted for respiratory discomfort, coupled with enteric fever. Duvedi told the Ken how much harassment he had faced. He told us how they would have been completely helpless without their son who has done an MBA because who would have been able to run around and write all those long emails to Star Health? The situation was so bad for the Duweds that the doctor had to step in and tell the agent to resolve their claims. Star Health's claim repudiations were the highest amongst its peers in the year that ended in March 22. It was over 17%.

Claim repudiation basically refers to the insurer denying to entertain the claim on the grounds that it does not fall. within the terms and conditions specified in the contract, or there is a fraudulent activity. While Star Health clearly needs to look into this and also work on its image in the media, it somehow seems to be still managing to do a good job at maintaining its retail policy renewal rate, which was 96% in the quarter that ended in June. More on this in the next segment. An analyst who spoke to Koshu pointed him to the disconnect. He said, And I'm quoting, sure, there are critical posts on social media and in the mainstream, but look at the renewal rates.

You can keep targeting the company on social media, but if it still manages to get renewals, then the company will be happy at the end of the day. End quote. In the June quarter, Star Health saw a 15% increase in its new business as compared to the same period last year. Plus, the company has also been able to cut down its operational expenses as well. well as claims payments. And that means that it's keeping its claims ratio low. And how does it do it? An underwriting expert explained it to us. He said that a company can manage the claims ratio either by incurring fewer claims or by increasing the premium amount. For this, Star Health

used a two-fold strategy. Not only did it tighten its underwriting, which translates into lower claims amount paid to individuals, but it also hiked prices for one of its most key offerings, the Family Health Optima Plan. Star Health is also winning the battle on the first front with over 15,000 hospitals in its network. But its operational stringency is clearly alienating its customers, and it could turn out to be a big challenge in the future for the company if it wants to maintain its high renewal rate and grow its business. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings.

A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.