Emergency fund vs health insurance: What should you really rely on?

Subscribe to enjoy similar stories. The venue was the National Stock Exchange. The agenda: investments, markets and wealth creation.

But one session shifted the focus from making money to protecting it. Because one medical emergency can wipe out years of disciplined investing. And yet, despite the obvious risk, health insurance remains under-penetrated across Indian households.

At the Mint Money Festival, Mahavir Chopra, founder of Beshak.org, and Shilpa Arora, co-founder and chief operating officer of Insurance Samadhaan, confronted an uncomfortable question: what’s really broken in India’s health insurance system? For a product that sees the highest consumer complaints within the insurance industry, can families realistically skip insurance and rely on a large emergency fund instead? Here’s what they said. The root cause of health insurance complaints is simple: expectation mismatch. As per Chopra this happens because the person who is setting the expectation (the sales agent) and the person delivering the expectation (who handles claims) are different people within the same company.

“ “The person who is selling you health insurance will give you a lot of promises about the product because his incentive is aligned with being able to sell the policy and not with ensuring outcomes for the customers. At the time of claim there is another person dealing with the customer whose job is to protect profits of the insurer," he explained. The sales team and the claims team operate with different incentives — and rarely in coordination.

Even product design follows a similar pattern. “For example, a product with unlimited sum insured is a nice hook. But the person designing the product is not talking to the person who is supposed