Life insurance companies can no longer distribute health insurance policies in the existing structure. IRDAI has issued fresh guidelines on health insurance sector in which it has said that life insurance companies can no longer offer pure indemnity based health insurance policies. However, life insurers can come out with fresh policies in line with non-life insurers and standalone health insurers.
Typically, health insurance policies offered by life insurance companies pay certain amount for a particular disease on claim settlement. They follow a table prescribed by IRDAI to settle claims. Hence, the claim amount can be higher or lower than the cost incurred for the treatment of a particular disease. On the other hand, health insurance policies of general insurers and standalone health insurers pay reinstatement value on hospitalization.
Also, life insurers pay higher commission in health insurance policies compared to general insurers and standalone health insurers.
Meanwhile, IRDAI has tightened norms for the health insurance sector in the new health insurance regulation. This comes in the wake of IRDAI’s plans to segregate regulations governing health insurance and general insurance sector.
Here are the other key amendments:
Uniform premium: Typically, health insurance policies are a one year contract and the premium can be revised every year. Now, the insurance regulator has proposed that insurers should keep the premium amount unchanged, at least for the first three years.
Cost of medical check-ups: IRDAI has asked insurance companies not to offer discounts to policyholders by bearing cost of medical check-up required before buying a health insurance policy. The regulator has now said that such expenses should be borne equally by policyholder and insurers.
Offer discount: In order to promote fitness among people, IRDAI has proposed insurance companies to extend discount on every renewal premium on the basis of fitness and wellness criteria. So far, insurers extend no claim bonus to policyholders on every renewal premium in the form of cash discounts or increased sum insured.
Robust claim settlement mechanism for senior citizens: IRDAI has asked insurers and third party administrators (TPAs) to put in place a mechanism to expedite claim settlement process for senior citizens. In addition, the insurance regulator has stressed the need to create a robust grievance redressal system for such citizens.
Bundled products: IRDAI plans to increase disclosures in bundled products. Typically, a bundled or combi-product is a combination of a health insurance policy with the benefit of life coverage. The insurance regulator has asked insurers to disclose break up of premium charged to avail both components – health insurance and life coverage. Also, the commission has to be paid accordingly to distributors. While life insurance policies offer first year commission of close to 35% of annual premium, health insurance schemes pay 15% of annual premium.
Minimum member in group insurance: Among the sweeping changes, one is to reduce the minimum requirement of members from 10 to 7 to avail benefits under group health insurance policies.
Typically, group health insurance policies are cheaper and provide a lot of benefits compared to regular health insurance policies like exclusion of pre-ailment disease, no medical check-up expenses, low expense ratio etc.