As the non-life insurance industry players are preparing themselves for introduction of suitable covers for persons with disabilities (PwDs), HIV/AIDS, and mental illness, they could face underwriting challenges for single-risk coverages due to lack of data, which is likely to push prices for such covers.
For introducing standalone products for mental illness, insurers would need some time to devise the products, understand demands and find out proper distribution channels to successfullt sell them, industry insiders told FE.
The current Irdai direction on insurance coverages for people with disabilities, HIV/ AIDS and mental illness is meant to ensure that no insurance company can deny issuing policies to persons who are actually physically disabled or mentally ill.
Irdai has directed every general and standalone health insurer to “immediately” launch products offering health insurance covers for persons with disabilities (PwDs), persons afflicted with HIV/AIDS, and those with mental illness. Issuing a circular on February 27, the regulator has directed insurers to put in place a board-approved underwriting policy that ensures that no proposal from these categories of population is denied.
“Mental illness and HIV/AIDS are already covered under existing health insurance policies. We need to understand whether we would need to create a network and increase awareness. That could be the one way. The other way is to have standalone products. We are discussing it with the regulator on how to take this forward,” an insurance company official said, requesting anonymity.
Notably, Irdai last year had asked all insurance companies providing health insurance to confirm compliance with regulations to cover mental illness before October 31, 2022.
“It is difficult to have a standalone product for mental illness because it is already covered in normal inpatient products and out-patient coverages wherever we have given in our products as a rider or as an add-on. But for a standalone product for these persons, it may take some time. Single risk coverages for mental illness and HIV/AIDS are not there at present. We cover everything on outpatient and inpatient, including mental illness and HIV/AIDS, under existing products,” said Sanjay Datta, chief — underwriting, claims and reinsurance, ICICI Lombard
Datta said for introducing standalone insurance products for persons with mental illness, insurance companies not only have to devise the products but they will also have to sell to make those products successful. “For this, we will do a lot of customer research and product configuration to see how to take this forward,” he said.
Sharad Mathur, MD & CEO at Universal Sompo General Insurance, said the Irdai circular supports inclusion of persons with disabilities, afflicted with HIV/ AIDS and those with mental illness. “It would encourage providers to evaluate and develop an appropriate product for the vulnerable section of the society. We are evaluating to construct a suitable cover for this special segment. Although lack of proper data for the purpose of pricing is a challenge, but it is not insurmountable. We look forward to serving the need to the best possible extent.”
According to Datta, lack of data is a problem for insurance underwriting for such covers. “The most important problem is to understand the demands and distribution channels for such products.”
“Data drive pricing. If there is a lack of data, then it would become challenging for underwriting products for mental illness. What we think is that these types of products would be slightly higher priced because insurers would anticipate higher claims,” an insurance analyst told FE.
The analyst said the current Irdai direction is meant to ensure that no insurance company can deny coverages on the grounds that a person already has mental illness or is HIV positive. There may be cases until now where insurers might have not wanted issuing new policies to persons who already have such illness. “The current guideline is not about whether the current policies provide coverages for mental illness or not or if I am a normal person and I get disabled and whether that is covered or not. This is about a person who is actually disabled or mentally ill and they go for a coverage. That is the difference,” he added.
Mental Healthcare Act, 2017 came into force with effect from May 5, 2018. According to the Act, every insurer should make provision for medical insurance for treatment of mental illness on the same basis as is available for treatment of physical illness. Currently, a person can apply for reimbursements against consultations with doctors and counselling for mental health problems under his/her existing insurance policies. The cases of hospitalization for mental illness is low as a person generally gets admitted to a hospital if the illness is very severe and requires active line of treatments. For insurance claims in such cases require 24 hours of hospitalization and active line of treatments to be done.