IRDA keen on standardisation of health insurance

The Insurance Regulatory and Development Authority (IRDA) has been monitoring the current pandemic crisis and the resultant issuance of guidelines for the health insurance companies so that the end user or policyholder's interests are not diluted.

While the pandemic was a surprise for all health insurance companies, the regulator IRDA has proactively came out to clarify that all the polices where the hospitalization is covered would include the pandemic related treatment. This has put a lid on the confusion that prevailed initially around the responsibility of the health companies.

While the regulator encouraged the companies to come up with pandemic-related standalone products (coronakavach) for ensuring the serviceability of the need, IRDA has made certain changes to the way the health insurance policies are issued and administered easing the policyholders to compare and use.

From this October, of the many changes, one major benefit for those policy holders who have paid for eight consecutive years, the insurance company can't reject any claim. Thus, making a long list of procedures and/or diseases being covered while the exclusion list of major diseases is reduced to under 20 from over 30 till now.

Considering the contactless and social-distancing nature of the post-pandemic world, insurance coverage for telemedicine has also been included by the regulator in health plans. This allows the insurers for the claims pertaining to telemedicine consultation instead of the normal consultation.

The insurers also have to adhere to a standardized wording prescribed by the IRDA for an informed choice of the existing and the prospective policyholders. The standards terms and clauses mentioned cover various critical items such as material facts (the information to be disclosed by the insured at the time of application of policy) which determine the claim settlement, management of policy i.e., porting, renewal, etc. This helps in the informed decision making for the policyholders.

For instance, if one has a Rs10 lakh Sum Insured cover with one percent cap on the room rent i.e. effectively eligible for Rs10,000 per day. However, if one were to opt for a room costing, say, Rs15K per day, which is 50 per cent higher than the eligible cap then the insurer would typically deduct 50 per cent from the total claim including the room charges and others.

The new regulations would mandate the insurers to clearly define the associate medical expenses in the policy and disallows the cost of pharmacy, consumables, implants, medical devices and diagnostics to be considered in this category.

Moreover, insurers need to further ensure that the proportionate deductions are not applied to those hospitals that don't follow differential billing or for those expenses where differential billing based on the room category aren't followed. Additionally, insurers are not permitted to apply proportionate deduction for ICU charges.

The regulator's view is that there are no different types or categories of ICU. These clauses have to be incorporated in the new products filed by the insurers on or after October 1, 2020, and for the existing products, which are due for renewal from April 1, 2021.

Though, this would push the insurance premiums upwards up to 20 per cent from the current median, it would enhance the experience of the policyholders with the benefits. This also makes for the younger age individuals/families to opt for health insurance and take advantage of the discounts by good health keeping - most plans provide deductions in the renewal premium upon non-claim and for maintaining healthy habits.

(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at knk@wealocity.com)