Health insurance

Greenvissage explains, Is a critical illness plan a better option than independent health insurance?

Life insurance policies offer a variety of riders or simply add-ons which can be helpful if understood properly. However, most insurance agents focus on selling the policy rather than explaining the same. Hence, people are often oversold on the benefits but still confused about the terms and conditions of the policy. One such common confusion is between a) buying a term insurance policy with a critical illness rider, or b) buying an independent health insurance policy alongside term insurance. A critical illness plan is a fixed benefit plan which offers a pre-decided sum assured if the diagnosis of a specified illness is confirmed. It helps the policyholder to cover several out-of-pocket expenditures and is useful for diseases where hospitalization may be minimal but the expenses high such as stroke, Alzheimer’s or Parkinson’s. Such plans often cover support for a reduction in income, if a person is affected by the illness. However, a critical illness plan is not an indemnity plan i.e. the actual expenses incurred by the policyholder are irrelevant here, and only the sum assured as mentioned in the policy is paid out. Therefore, one needs to evaluate their finances properly before opting for any of the two options. The critical illness plan might be suitable for people who are capable of covering their health expenses from other kinds of savings or need additional coverage on top of their existing health insurance plan.  In most cases, it is usually recommended to buy a separate health insurance plan in addition to a term insurance policy, and avoid the additional premium for critical illness add-on altogether. There are three major reasons underlying this recommendation.

The coverage of a critical illness plan is limited to a list of specified illnesses. This list varies anywhere between 10 and 50 critical illnesses, consisting of rare illnesses such as cancer, heart attack, kidney failure, renal failure, stroke, live disorders, paralysis, etc. There may be a few policies that offer a higher number of illnesses. However, it does not cover the expenses towards regular surgeries or minor treatments. Also, any illness due to lifestyle habits such as smoking, drinking, drugs and substance abuse are usually excluded from the plan. These plans also exclude HIV, Pregnancy issues, Childbirth issues and Congenital disease death within 30 days of diagnosis. Those who have experienced are well aware that hospitalization costs often skyrocket even for non-critical illnesses and therefore, it is important to have a health insurance policy which covers routine illnesses as well rather than having a cover only for critical illnesses. Secondly, in the case of a critical illness plan, the benefit expires once you have been paid out i.e. the benefit can be availed once and thereafter, the policy lapses. However, most critical illnesses have chances of high chances of reoccurrence. On the other hand, in the case of a health insurance plan, the sum assured gets reinstated, each time the policy is renewed which is not the case with critical illness plans. Also, if you happen to contract more than one critical illness, the payout would be made only for one such illness while health insurance provides coverage for multiple illnesses as well. The third drawback of a critical illness plan is the nuance coverage of such plans. For example, while cancer is usually covered in a critical illness plan, there are certain kinds of cancer and all early-stage cancers which are not included in the same. Such illnesses can also cost substantial money, and therefore, it is always better to be covered through a health insurance policy rather than solely relying on a critical illness plan.

Greenvissage explains, How is buying an EV more economical than buying a fuel-based vehicle?

The world is swiftly moving towards embracing Electric Vehicles (EVs) as the concerns over climate change are at an all-time high. However, many people are still buying fuel-based vehicles as they live under the myth that buying an EV would cost a fortune. It’s rather the other way around as EVs are already proving to be more economical in the long run. Let us evaluate the finances of both options and you will know for yourself which is better. Firstly, the cost of purchasing the vehicle under the two options is not much different. A large number of brands have already announced to launch of their electric vehicles in India. Tata has already launched its most affordable Tiago EV model which is priced at INR 8.5 lakh onwards. Citroen and Mahindra, too are going to launch their EV hatchbacks with estimated prices below INR 12 lakh. So, in terms of purchase cost, Evs are available in all price segments including the affordable car segment. Secondly, the running cost of fuel-based car variants is high as petrol and diesel prices are skyrocketing. Meanwhile, an electric vehicle is environmentally friendly and undoubtedly a cost-effective alternative. EV batteries are known for converting 59-62% of energy into vehicle movement while petrol-run vehicles only convert 17-21%. Typically, an EV has a running cost of INR 1.2-1.5 per km which in the case of fuel variants is at least INR 9-10/km. Hence, over seven years, you would have barely spent one lakh rupees for running an EV, while a petrol car would cost close to five lakh rupees. Coming to the cost of maintaining the vehicles, EVs have way lesser number of components to be maintained, unlike petrol or diesel cars which need regular servicing of gears, engines, and replacement of other worn-out parts. In the case of an EV, these parts are replaced with an electric motor, controller and battery pack and therefore, the cost of maintaining the car is lower. For example, the maintenance of the Tata Nexon EV is as low as INR 2,800 per year (or per 10,000 km) which in the case of petrol cars would range between INR 15,000-20,000 per year. The EVs currently have a special tax benefit in various states which ranges from 50-100% exemption on road tax, apart from certain other relaxations in loans for purchasing an EV. Meanwhile, the road tax is being increased in almost every state, with Karnataka charging the highest in the country. This is being done to compensate for the environmental hazards and also to force people to buy EVs. Thus, financially, it is more prudent to buy an EV. However, EVs have several other issues of their own. Many people have faced issues with charging as they are unsure of how long the charging shall last, or where they would find the nearest EV station. The EV charging stations have been developed on a full scale yet and the number of such stations is very low. Further, the batteries are also often inconsistent in their performance. While India has announced a battery-swapping policy, the implementation and adoption of battery-swapping are nowhere to be found yet. Thus, there are a few important gaps that EVs need to plug into before they can be adopted on a large scale.

Greenvissage explains, what is happening at GoMechanic and why are its founders in trouble?

India’s startup sector has boomed over the past few years with over 100 unicorns. However, many of these startups are now struggling to raise funding and therefore, are opting to lay off employees. GoMechanic, the Gurugram-based car servicing and auto spare parts portal, backed by Sequoia India, is the latest in the series of such layoff announcements. The company has laid off 70% of its workforce due to a financial crunch. Amit Bhasin, the co-founder, in a social media post mentioned that the founders take full responsibility for the situation and have unanimously decided to restructure the business. Interestingly, he further went on to confess that the company neglected financial reporting norms and that a third-party forensic audit will be conducted soon. The confession has sent shockwaves around the industry. Apparently, the startup was in talks with Khazanah, the sovereign wealth fund of Malaysia and also SoftBank to raise funds. As a part of the funding process, it was made subject to due diligence conducted by EY, the premiere global auditing firm. EY, in its report, brought forward various lapses in the company’s accounts and operations. EY alleged that GoMechanic overstated its revenue and also diverted funds. Please note, these are allegations which will be confirmed only when the forensic audit is complete. However, the due diligence report has raised several red flags such as the use of fictitious garages to inflate sales numbers, high pay cheques to founders even when the company is in losses, selective payments to certain garage units, and discrepancies in revenue and user metrics among others.

A detailed analysis of the financials of GoMechanic reveals GoMechanic’s revenue rose to INR 97 crore during FY 22 double from INR 47 crore in FY 21 and depicting a 5x growth in past four years. However, the net loss to has increased 23x in the last four years from INR 4.8 crore IN FY 19 to INR 114.2 crore in FY 22. And yet, the four founders have drawn a fat pay cheque in form of incentives, in addition to their remuneration, totalling INR 9 crore apart from other reimbursements. Two co-founders, Nitin Rana and Rishabh Karwa were paid a further incentive worth INR 2.9 crore and INR 2.7 crore respectively, apart from the remuneration mentioned above. The company has also given a corporate guarantee for a loan taken by Parcit Autocrazy Private Limited for an INR 5 crore credit facility from Kotak Mahindra Bank. Autocrazy is a manufacturer of auto accessories under the brand name of GoMechanic and has a turnover of around INR 65 crore with a net profit of INR 76 lakh during FY 21. Interestingly, the company’s registered address, as well as email id, is the same as that of Nitin Rana, one of the co-founders of GoMechanic. The company’s directors Ramesh Kumar and Abhishek Rana also seem to be related to Nitin Rana. It is important to note here that Autocrazy is not disclosed as a related party in the financials which carries higher disclosure requirements in annual reports as well as tax returns. The company has also extended huge advances to its vendors and workshops which stand at INR 72 crore in FY 22, doubling from INR 36 crore in FY 21. It’s not that the company is rich in cashflow, as significant receivables worth INR 41 crore are overdue for more than six months, while receivables worth INR 2.7 crore have been marked as doubtful as they have been overdue for over a year or more. These advances to vendors and the overdue receivables have been alleged as fictitious transactions to overstate revenue and divert funds. Thus, for now, the startup seems to be in trouble and only the outcome of a third-party audit can clear the clouds. The race to be the fastest-growing and highest-valued is leading many companies to opt for unfair practices making it imperative for investors to once again dive deeper into the numbers before taking big bets.