If the new regulations come in place, customers will get more choices as the number of options will increase with the introduction of health insurance plans by life insurance companies.
As an ode to the common man, the Insurance Regulatory and Development Authority of India (IRDAI) may soon allow life insurance companies to sell indemnity-based health insurance plans to the customers. As per an order issued by IRDAI on 25th February 2020, a committee has been formed which will study the feasibility of allowing life insurers to offer indemnity-based health insurance policies in the coming time. The nine-member committee, which will be headed by Mr G. Srinivasan, Director, National Insurance Academy, consists of noted representatives from all insurance sectors, including general, life and standalone health insurance companies.
The committee has been directed to meet as often as required over a period of two months and submit its recommendations after reviewing various aspects like feasibility and the business scope for life insurance companies to offer indemnity- based health insurance products, extant statutory provisions that are applicable in this regard and lastly, any other matter as permitted by the chairperson. It is believed that if the regulatory committee gives a favourable report, customers may soon be able to choose an indemnity cover from 24 more insurers – considering the number of life insurance companies.
Until now, life insurers are only allowed to offer fixed benefit health plans to the customers. Under a fixed benefit health plan, the insured is paid a fixed and guaranteed amount equivalent to the sum insured in case of occurrence of an insured event. All such plans offer the insured a lump sum amount as claim irrespective of the actual or intended expenses incurred during hospitalisation. For instance, Vijay Varghese opted for a Critical Illness cover plan with a sum insured Rs 15 lakh. Within the policy term, he was diagnosed with one of the listed critical ailments under his plan. Now, the insurer will pay him a lump sum of Rs 15 lakh as a claim payout regardless of the number of expenses incurred.
Talking about indemnity-based health insurance policies, as of now, only general insurance firms and specialised health insurance companies are allowed to offer indemnity-based health policies. The regular Individual Health Plans or Family Floater Plans come under indemnity plans. Indemnity-based health plans indemnify the policyholder against hospitalisation expenses up to the total sum insured. Under the plan, the insured is reimbursed the actual expense incurred during hospitalisation only up to the total sum insured under the plan. For instance, Mr Roy has a health policy with a sum insured of Rs 10 lakh. He gets hospitalized and his total expenses come up to Rs 4 lakh. In this scenario, the insurer will reimburse only Rs 4 lakh (subject to policy conditions) and the balance Rs 6 lakh may be used in case of further hospitalization during the policy period.
If the insured has opted for cashless hospitalization plan, the insured only needs to pay a certain fixed amount and the rest is taken care by the insurer. However, in case the insured has not opted for cashless hospitalization plan, the person needs to submit the necessary medical reports, bills paid, and other required documentation based on which the insurer reimburses the expenses.
The IRDAI move follows intense lobbying by private life insurance companies for entry into the fast-growing health insurance segment. Many big players are quite conscious of their role and responsibility and are quite keen on offering indemnity-based health insurance plans. It is even believed that life insurance companies have a better understanding of the long term pricing modelling as they offer products (term plans) that offer coverage for a longer-term i.e. 25 – 30 years. By allowing life insurance companies to sell indemnity- based health plans, the regulator will allow the long-term pricing model to be implemented in health insurance plans as well, which will benefit the customers.
Doing so will not only simply the buying process for the customers but will even give them more choices. Till now, customers only had the option of choosing an indemnity-based health plan from those offered by general insurers and standalone health insurance policies. However, if the new regulations come in place, customers will get more choices as the number of options will increase with the introduction of health insurance plans by life insurance companies. Moreover, the customers will also have the prerogative of buying their life and health insurance from the same insurer.
(The author is Chief Business Officer-Life Insurance, Policybazaar.com)