I first came across “free” insurance a number of years ago. I cannot remember the details exactly but it is where an insurance company provides coverage if you lose your EZ-link card within a short period of time e.g. 1 year.
In this article, we will use the free covid-19 vaccine insurance as an example. The arguments made can apply to all free insurance schemes.
Free Covid-19 Vaccine Complications Insurance
Fast forward to April 2021, I came across this article from Seedly where multiple insurance providers are providing free Covid-19 vaccine complications insurance. The various insurance products basically provide some cash benefits if there are any complications arising from taking the Covid-19 vaccine.
Some of the benefits include lump sum cash payouts and daily hospitalization cash benefits.
The various providers include
- Great Eastern
- Raffles Health Insurance Singapore
Covid-19 Side Effects
The side effects of the vaccine can range from light to serious. The policy typically only kicks in when you are hospitalized from one or more of the rare serious side effects.
Common light side effects include
- Pain/redness/swelling on the arm that received the vaccine
- Muscle pain
- Swollen lymph nodes
The above side effects usually go away by itself or you can take 1 or 2 paracetamol tablets every 6 hours as needed.
Rare serious side effects include
- Difficulty breathing
- Blood clotting
- Anaphylaxis (severe allergic reaction)
- Swelling of the face, throat eyes or lips
These serious side effects are the ones that demand immediate medical attention and possibly hospitalization.
Do You Need The Free Covid-19 Vaccine Complications Insurance?
If you, unfortunately, come down with serious complications after taking the Covid-19 vaccine, Medishield Life can cover most of the hospital expenses. On top of that, all seven integrated shield plan providers also extended their coverage to cover hospitalization resulting from vaccine complications.
There is also a Vaccine Injury Financial Assistance Programme for COVID-19 Vaccination (VIFAP) that can provide a one-off payout to help alleviate any financial difficulty arising from any complications.
With the schemes mentioned above, it should be sufficient to cover most, if not all of our expenses. The free vaccine complications insurance only provides an additional cash payout.
How Rare Are The Covid-19 Vaccine Side Effects?
So what are the probabilities of us getting the side effects?
For the common side effects, I found a piece of data that covers 1 million Americans that took the Pfizer-BioTech Covid-19 vaccine.
The majority of people that took the vaccine will encounter one or more of the common side effects. Most of these side effects will go away by themselves within a few days.
However, to benefit from the Covid-19 vaccine complication insurance, we will need to be hospitalized.
The Rarity Of Serious Covid-19 Vaccine Complications
According to MOH in February 2021, out of the more than 155,000 people that took the vaccine, 4 people suffered from severe allergic reactions. This is close to the expected rate of severe allergic reactions globally of 1 to 2 cases per 100,000 doses.
One of them was under observation for a few hours while the rest were discharged from the hospital after one day of observation or treatment. None of the four needed ICU support.
To illustrate the rarity of the occurrence, we will compare it to other rare incidences.
- Serious complications due to Covid-19 vaccine – 1 in 100,000
- Getting a straight flush – 1 in 72,192
- 16 heads in a roll when flipping a coin – 1 in 65,536
- Striking 5 out of 8 digits in Toto- 1 in 55,491
- Striking 4D – 1 in 10,000
- Struck by lightning – 1 in 3,000
- Born with extra fingers or toes – 1 in 500
- Getting Covid-19 – 1 in 54
- Dying from Covid-19 if you have Covid-19 – 1 in 47
- Giving birth to twins – 1 in 30
The probability of getting any serious complications from the vaccine is very low. You are more likely to get Covid-19 or die from Covid-19 than to suffer from serious vaccine complications.
The pros of getting vaccinated greatly outweigh the risks of serious side effects that are linked with the Covid-19 vaccination. It is therefore still highly advisable to get vaccinated.
However, vaccine safety and efficacy for these specific sub-groups are still being studied
- Pregnant women
- Children below 16 years old
- Individuals with severely compromised immune systems
- Individuals with a history of severe allergic reactions
For the rest of us, we should still get vaccinated to try to get to herd immunity levels to lower the risk of transmission of Covid-19 within our community.
Is The Free Insurance Really Free?
It is unfair to say that the companies are purely doing it for profit purposes. But let’s not lie to ourselves that they are losing out in this deal and just doing it for karma. Nothing is free so we will need to look at why these insurance companies are providing us with a free insurance product.
Corporate Social Responsibility
This insurance product aims to encourage vaccinations by offering additional protection if you unfortunately suffer from vaccine complications. Customers will feel that their health insurance provider is doing their part during the pandemic.
By offering it during the pandemic, it helps in building corporate social responsibility to give the company a good image. This builds brand value, putting the company in a good light.
For non-customers, this action will bring awareness to the insurance company’s brand. The company will be able to advertise its brand to new audiences. You don’t have to fork out money and you get in return a product. Next time when you are looking for an insurance product, this company might pop up in your mind.
Companies will be able to foster relationships and build loyalty with existing customers. Customers will feel that the relationship with the insurance provider has provided them with additional value.
There is a reciprocity effect when you receive something for free and thus be more willing to spend more. Customers are willing to reward or punish companies based on the company’s value and actions.
The lead magnet is the free vaccine complication insurance. By offering you a free product (the lead magnet), they are getting in return your contact details and the opportunity to market you their other products. The meaning of a lead means that you are a potential customer. They will be able to cross-sell other insurance and financial products in their arsenal.
Positive Expected Value
Insurance companies are in the business of risk calculation and doing math. The insurance business is a trillion-dollar industry. A trillion has 12 zeros. They are not in this to lose money. The companies did the math and they determined that this free insurance will likely be overall profitable.
They are treating the cost of fulfilling the insurance as the cost of capturing a lead plus some marketing. The action of capturing you as a lead not only makes you a potential customer, it also denies other insurance companies from making you a lead.
Expected Value Of Insurance
P(A) x B
= (1/100,000) x S$2,000
A – Hospitalized from vaccine complications
B – Insurance payout (most range from S$1,000 – S$2,000)
From the customer’s perspective, you are only getting about S$0.02 worth of insurance while giving the insurance companies a chance to sell you more stuff. The problem is that it is easy to exaggerate the possibility of a rare event without looking at the statistics.
In the company’s perspective, paying S$0.02 to acquire a lead is dirt cheap. Even if I am 1000 times off, the customer acquisition cost is just S$20. They will easily make back multiples of that by selling you other insurance and financial products.
Most insurance companies also limit their liability of this free insurance product by
- Setting a limited validity date range
- Limited number of sign-ups.
The free insurance is not free. The insurance companies did the math and the cost of free insurance will highly possibly turn into an overall net gain. They can easily make back the cost by selling you other products.
You are giving away your contact details and becoming a lead in exchange for a free insurance product that covers a situation that occurs extremely rarely. There is a higher chance of you getting covid or dying from Covid-19 than suffering from serious complications from the vaccination.
The amount of benefits you will receive is extremely limited due to the rarity of the event. You are putting yourself in the way of multiple cold calls and marketing emails just for n insurance that is probably worth S$0.02.
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