Health insurance policies in India are still largely plain vanilla covers. But, they have come a long way from an ignored product category, especially with the new tax sops in the Budget 2015-16. With increasing insurance awareness, people are looking for more benefits and better purchase for the money they are putting in a health insurance.
Understanding the pulse of insurance buyers, the Insurance Regulatory and Development Authority (IRDA) has suggested some new proposals this year, to improve the Indian health insurance framework. Here is a look at the recent recommendations made by Irda and how they are likely to help insurance buyers.
Entry age-based pricing
Irda has proposed that health insurance companies should take into account the entry age of the policyholder (age at which they buy their first health policy) for determining the premium. Currently, the premium is based on the age of the policyholder while taking any new policy. As per the new proposal, if two people of the same age buy a health policy at the same time, the person who is already having a health insurance will get a lower premium as compared to the one who is applying it for the first time.
Early insurance buyers will thus get discounted premiums on every renewal apart from NCB. This move would encourage more youngsters to buy insurance.
Premiums linked to CPI
Yet another recommendation is to link insurance premiums to Consumer Price Index (CPI), just as the Reserve Bank of India links the repo rates to inflation. The suggestion by the committee is to include a benchmark — Consumer Price Index (CPI) + 3 per cent for an automatic revision of premiums annually. This effectively means that if inflation is on a rising trend, the hike in insurance premiums would be gradual and steady, helping the common man by lessening the burden on his pocket.
Many insurance experts have suggested to make the sum assured inflation-indexed too, to make it more beneficial for buyers.
Wellness and prevention-based incentives
Currently, the only incentive given to health insurance buyers is the No Claim Bonus (NCB) for every claim-free year. Apart from this, there is a call now to initiate incentives to those customers who follow wellness programmes. At present, some health insurance companies are offering discounts in bills for certain health checkups and wellness programs. More health insurance companies are likely to follow this route by collaborating with health and fitness chains.
The Irda believes that such incentives would push more people to follow a healthy lifestyle, which would be helpful for insurance companies as well in the long run as the number of claims may reduce over time.
Long-term insurance and health savings accounts
Long-term insurance plans with single premium and linking of health premiums to savings accounts are the other two much-awaited steps.
According to the proposal, long-term health policies will have 3-5 years tenure and health savings accounts will create a corpus over 5-15 years. Health saving accounts will enable policy holders to make a saving to meet the rising health costs. It would also be helpful in generating a healthcare corpus for their post-retirement years. Long-term health plans would also ensure loyalty of customers over a long period for the insurance companies. Apart from these, it has also been advocated to have a separate vertical in Irda for administering the health insurance segment and to address all issues in the segment comprehensively. Comprehensive health covers with inclusions like covers for expenses at out-patient departments are also on the way. These proposals, if implemented, can usher in a series of reforms in the health insurance sector.
(The author is Founder and CEO, Bankbazaar.com)