To help policyholders make informed decision, IRDAI has asked general insurance and standalone health insurance companies to indicate level of complexity of their health policies.
The insurance regulator has proposed the introduction of a color coding system that will indicate the complexity of the products. IRDAI has suggested three colors—green, orange and red to signify the complexity of the products.
While green color will signify that the product offered is a simple product, easy to understand and comprehend, orange will indicate moderately complex product. Red will indicate the most complex health insurance policies.
These color codes will be used by every general and health insurance company on their website, product advertisements and other promotional activities. “Every individual health insurance product offered by general and health insurance companies shall carry a diagrammatic representation of the color coding to indicate the level of complexity of the product,” said IRDAI.
The regulator has suggested a mechanism to calculate the degree of complexity of a product based on the score given to a product on a scale of 0 to 6.
A product will be assigned 'green' if it attains a score of 2 or less. Similarly, a product will be assigned 'orange' if it has a score of more than 2 but less than or equal to 4. A product with a score greater than 4 and less than or equal to 6 will be assigned the 'red' color, said IRDAI.
Insurers will have to score a product based on seven parameters including number of option covers offered, percentage of co-pay, the number of months of waiting period, number of treatment procedures/diseases to which sub-limits are applicable, deductibles, number of permanent exclusions and simplicity of terms and conditions.
Insurers will assign equal weight of 14.28% to all these seven parameters and calculate the scores based on the criteria prescribed by IRDAI. The weighted average scores of all the 7 parameters will then be added together to get the final score of the product on a scale of 0 to 6.