By Naval Goel
Regulations play a significant role in defining and shaping the future of an industry. The Insurance Regulatory Development Authority of India (IRDA) has introduced a few changes in the health insurance regulations over the last few years. These changes replace those regulations that were formulated in the last few years. Here’s a look at all the six changes:
1. Combi plans can include any life and health insurance plan
Earlier, IRDAI had introduced the guideline for a combi plan that would allow a non-life and life insurer to enter into an agreement for offering such kind of plans. Lately, IndiaFirst Life Insurance in association with Star Health Insurance has announced a Star First Combi Plan which combines health and life insurance plans. It is the first ever plan to mix a health plan with a pure term plan. This begins the era of a new type of combi plan which allows creating a hybrid combo of any life, i.e., endowment, ULIP or money-back with a health plan. With this change, customers are enjoying clubbed benefits and easily managing two different plans via one policy. On the other hand, the agents are offering more diverse and complete packages to their customers.
2. Benefit plans will now have cumulative bonus
Cumulative bonus was not an added feature in defined benefit policies like critical illness plans until now. From now on, such kind of bonus is not only offered, but there is an explicit mention of the same in the policy document and prospectus. The inclusion of cumulative bonus in benefit plans has increased the value of the sum insured over a certain period of time, thereby helping in meeting higher treatment expenses in the future. But the corresponding increase in the amount of premium is not that significant. However, if a claim is made in any specific year, the cumulative bonus will face a reduction, accordingly. Here’s how it works – For every year when the claim is not made, the sum insured will be increased by a certain amount of percentage to a maximum of about 50% of the original sum insured. This particular addition increase is the cumulative bonus that will accrue to the policy.
3. Added wellness benefits
Health insurance premiums are based on sum insured and age along with health maintenance. In the IRDAI guidelines of 2013, it was already mentioned to reward people who got a policy at an early age and kept on renewing their plan at regular intervals. To further increase the benefits to such policyholders, the latest guidelines state rewarding the insured on their wellness and preventive habits and mentioning such kind of incentives right in the policy document and the prospectus. So the more anyone takes care of their health, the more benefits they receive. This doesn’t just lure the customers but also helps them in making healthier choices. However, no discount is offered on any third-party service. To elaborate, insurance companies are not allowed to offer any discounts on membership of a health club, regardless of the tie-up. Although, discounts in the amount of premium and on pharmaceuticals, diagnostics, or consultations are still allowed provided, they are in the network of the insurer.
4. Launching pilot products, a mandate for insurers
This move has caused a paradigm shift in the industry. A pilot product is close-ended with term life of only a year and is only offered by health or general insurers for the first five years. They are at liberty of rolling it into a regular one or simply withdrawing the same. The idea behind such a product is to cover uncovered risks. To protect the interest of the policyholders of a pilot product, the regulator has put in an obligation of porting such customers to an existing product of the respective insurance company. This particular regulation encourages insurers to try new products and brings continuity benefits to the insured.
5. Flexibility in proposal forms and independent designing
Be it life, health or general, all insurance companies can design their own proposal forms with a different set of standard declarations as its part with strict prohibition of any explicit or implicit consent of prospects to share information with a third-party.
6. No more indemnity-based products to be offered by life insurers
The sale of indemnity-based products is strictly prohibited by the regulations even though they were started only a few years back. Indemnity programs are meant for reimbursing incurred hospital expenses. Current holders of such plans are reaping the benefits till their term expires. However, if there is a bit of doubt on the claim experience taking a hit, here’s the solution. Actuarial assumptions consider many factors which include product continuity and business volume. Prudent insurance companies need not worry, especially because they create sufficient reserves to meet the expected claims, ensuring zero adverse impact on processing claims and servicing the policyholders with the regulation.
Standalone and non-life health insurers can still offer indemnity products. Majorly, life insurers may still offer their defined-benefit health plans like critical illness wherein a lump sum amount, despite the actual hospital expenses, is reimbursed to the insured. Nevertheless, life insurers are prevented from offering one-time premium health insurance products on the unit linked platform.
So, these are the six new regulations explained in detail. One piece of advice from the health experts in these rapidly-modifying times would be to ensure appropriate health insurance cover for yourself as well as your entire family. In comparison to the older families, younger families can go for a family floater health cover where the policy provides cover to children up to the age of 25. A critical illness cover is recommended for people touching their 40s. Also, reviewing the amount of coverage after a span of 3-5 years is highly recommended along with maintaining a healthier lifestyle.
(The author is CEO & Founder, PolicyX.com)