ICICI Lombard Elevate: Is the unlimited health cover worth it?

After Covid,  the fear factor has prompted health insurance buyers to look for ever larger covers, making Rs 1 crore policies very popular. Now, ICICI Lombard has gone a step further by launching a health insurance policy with unlimited cover. How will this work? Do you really need an unlimited cover? Here’s our take.

Claims record

The first thing to check out before buying a health cover is whether the insurer is serious about paying your claim. ICICI Lombard is a joint venture between ICICI Bank and Fairfax Financial Holdings Ltd. It ranks 8th in terms of size  among all insurers. Its claims settlement ratio is so-so, with a ratio of 86.86% (by number of claims), close to the industry average of 88.95%. However, its claims settlement by value is lower, at 68.49%, compared to the industry average of 80.64%. But it does score high on quick settlement of the claims that it accepts,  with 100% of claims settled within 3 months, surpassing the industry average of 97.12%. All figures are based on data for FY24.

Policy basics

ICICI Lombard Elevate offers both individual and floater policies. Unlike many policies that limit entry age to 65 years, this policy is available to anyone 18 years or older. Dependent children as young as 91 days can also be added..

The policy covers single private AC rooms, which we consider essential. Additionally, it does not impose any disease-specific copayments.

Pre-hospitalization and post-hospitalization expenses are covered for up to 90 and 180 days, respectively, which is more generous  than the industry standard.

For claim-free years, the policy provides a 20% cumulative bonus, up to a maximum of 100% of the sum insured. For instance, if you start with a sum insured of Rs.5 lakh, after five claim-free years, your sum insured will double to Rs.10 lakh. The policy also includes a reset benefit, where the insurer restores the sum insured once depleted due to a claim, making it available for future claims.

However, this restored amount cannot be used by the same policy member for the same illness within the same policy year. For example, if a family of four holds a Rs.5 lakh floater policy and the primary member uses the full sum for a cardiac surgery, the insurer will restore the Rs.5 lakh sum insured. This can be used by other members for any medical expenses. However, the same member cannot use it for  cardiac-related expenses in the same policy year.

Policy limitations

The policy imposes a two-year waiting period for bariatric surgery and certain specified diseases, while the waiting period for other pre-existing diseases is three years. This is not the best, as some policies offer shorter waiting periods.The policy also excludes expenses related to investigation and evaluation, rest cures, and rehabilitation. Treatments for obesity, refractive error, cosmetic surgery, and any treatments required due to participation in hazardous or adventure sports are excluded from coverage. These exclusions, however, are common among most health insurance policies. For full details of exclusions and waiting periods, refer to the policy wording on page 28.

The signature feature: Unlimited cover, and why you don’t need it

ICICI Pru Elevate has got a lot of favourable press for its  unlimited insurance cover. Healthcare inflation often runs higher than consumer price inflation. This may make unlimited coverage seem like a good option. But we believe you shouldn’t bite the bait  for the following reasons:

1. Health insurance is an indemnity product which means it only pays for the actual cost of treatment. Therefore, you will actually end up using this benefit only if you incur astronomical hospitalisation costs on a rare disease requiring surgery. For most other conditions, the insurer won’t pay you a higher sum just because you have an unlimited cover. .
2. For those who are faced with serious conditions,  it’s unlikely that all costs will be incurred during hospitalisation. Any serious  illness often results in expenses beyond the pre- and post-hospitalization period, which the policy doesn’t cover. In this policy, home nursing is covered for only 10 days post-hospitalization, with a limit of Rs.2,000 per day. Additionally, other expenses such as diagnostic tests and medical equipment installed at home are not covered by an indemnity policy, regardless of how large the coverage is.
3. Unlimited cover comes at a significantly higher cost.  For an individual policyholder aged 36-40, an unlimited cover costs Rs.29,959, whereas a Rs.10 lakh cover costs Rs.11,254. For a family of four, with both adults aged 36-40, an unlimited cover costs Rs.60,782, compared to Rs.32,505 for a Rs.25 lakh cover. Very few health conditions will call for a more than Rs 25 lakh expense in real life. While the unlimited cover does  cost less than double   the Rs.25 lakh cover today, this need not continue in  future. For example, assuming a medical inflation rate of 5%, an unlimited cover could cost more than twice as much as a Rs.50 lakh cover in 15 years.

If you want to know why you don’t need a super-large health cover, refer to How much health insurance do you need? – PrimeInvestor

What it costs

Having said this, for a quantifiable cover, the premiums for this policy are relatively affordable. Below is a comparison of its premiums against other policies available in the market. Please note that the premiums listed here are indicative and may vary. At the time of underwriting, the insurer may apply additional loadings based on individual policyholders’ profiles.

The premiums mentioned below are for individuals aged 36 to 40. For family floater plans, the premiums apply to a family of four (two adults and two children), with the oldest member falling in the 36 to 40 age group.

Policy addons

The ICICI Lombard Elevate policy offers a variety of add-ons, which can make choosing the right one a bit overwhelming. Below is our take on the major add-ons. 

Infinite cover

While the main policy offers an unlimited cover option, this add-on provides unlimited coverage for a single claim over the lifetime of the policy. For example, you can purchase the policy with a Rs.5 lakh sum insured and opt for the infinite cover add-on. The policy will then cover a higher claim, say Rs.25 lakh, once. After that, this add-on cannot be renewed. In the sample case we reviewed, the premium increases by 10% when opting for the infinite cover add-on.

Our Take: We recommend having a meaningful, no-strings-attached sum insured from the outset. Once this is in place, the infinite cover add-on doesn’t offer significant advantages for the additional premium. The fact that the add-on can’t be renewed after a claim makes it even less attractive.

Power booster

This add-on provides a 100% increase in the sum insured as a bonus, regardless of any claims made. This is in addition to the cumulative bonus available without the add-on. In the sample case we reviewed, opting for this add-on increases the premium by 15%.

Our Take: If you're looking to increase your coverage, raising the sum insured or purchasing a super top-up is a more straightforward option. Even without this add-on, your effective coverage could likely exceed the sum insured due to features like the cumulative bonus and restore benefits. We don’t see much value in paying extra for this add-on.

Jumpstart

Although this policy has a three-year waiting period for pre-existing diseases, the Jumpstart add-on can reduce the waiting period for certain diseases to just 30 days. This add-on is relatively expensive, increasing the premium by 30% based on a  sample case. Once opted for, the Jumpstart add-on cannot be removed in subsequent renewals.

Our Take: While this add-on is costly, it may be valuable to those who wish to cover pre-existing diseases sooner. Note that it applies only to a selected set of diseases—refer to the policy wording on page 16 for details. Also, there’s no guarantee that the insurer will approve this add-on; depending on the perceived risk, they might deny the add-on or even the policy itself.

Inflation protector

This add-on allows you to increase the coverage in line with the Consumer Price Index (CPI). However, there are two important considerations:

1. Non-Cumulative Increase: The increase in coverage does not compound.  For example, a 5% annual increase due to CPI over 25 years results in a 125% increase in coverage, compared to a 239% increase in prices that you will face due to cumulative inflation. 
2. Medical Inflation: Medical inflation often exceeds consumer price inflation, which can reduce the usefulness  of this add-on.

In the sample case we reviewed, opting for this add-on increased the premium by 2.3%.

Our Take: For individuals in their 20s and early 30s, it's likely that you'll need to significantly increase your health cover by your 40s or 50s. At that point, a super top-up policy may be a more cost-effective option. However, a new policy will require fresh underwriting. If you want to avoid the need for fresh underwriting in the future, this add-on might be worth considering, despite its limited ability to keep pace with medical inflation.

Conclusion

While an unlimited cover policy may not be necessary, the ICICI Lombard Elevate is still a policy worth considering. It offers several essential features that can be beneficial. However, it's important to note that ICICI Lombard's claim ratios are not currently the best. We recommend comparing this policy with other options listed in Prime Health Insurance to ensure you find the best fit for your needs.

Reference links

• Policy wordings
• Brochure
• Premiums chart