Draft Health Insurance Guidelines – A winner

In the month of January 2016 The Final Exposure draft on Health Regulation 2016 has been put out by IRDAI. This draft contains several proposals and guidelines to streamline operations of health insurance companies and facilitate seamless flow of benefits to policy holder. The guidelines are almost entirely positive and if accepted and implemented, would transform the health insurance landscape for the better.

Some of the significant proposals are highlighted here.

Underwriting policies – The guidelines are directing the insurance companies to make their underwriting policies to address both standard & substandard lives. Underwriting guidelines should hence have objective parameters like levying extra premiums, so that subjectivity & arbitrariness can be done away with.

Underwriting policy itself has to be board approved & underwriters need to follow such clearly laid out guidelines. Denial of proposal of insurance should be the last resort & the reason for the same is to be communicated to client.

Insurers may reward investors for entering early, for favourable claims experience, preventive & wellness habits provided it is disclosed upfront. A very welcome move, which will reward good lives & favourable behaviour

Proposal Form – There are several proposals to tighten what is being collected & stipulates that such information cannot be shared with anyone. Also, no clause shall be introduced in proposal form taking consent to disclose such policy holder information.

AYUSH Treatment – Insurers may provide coverage for AYUSH ( alternative medicines ) treatments in their policies provided it is in a government institution or recognized institution. AYUSH coverage is left to the discretion of the insurer as the guideline says the “insurer may offer AYUSH cover” & has also left the level to which it would offer such cover to the insurer’s discretion.

Pilot products – To facilitate innovative product creation “Pilot Products” may be introduced for a term not exceeding 5 years. After 5 years, it may be converted into a regular product or withdraw based on their experience & after offering valid reasons.

Entry age – Guidleines now specifically prescribe that the product entry age be atleast 65 years. Also, once the product is taken & renewed periodically, renewal should not be denied on grounds of age/ claims ( except for benefit policies ). This has been there for sometime, but it is being further force and sanction with these guidelines

Free look period – All health insurance policies to offer a 15 day free look period in which to examine & return if not acceptable. This is on the lines of the free-look period offered in life insurance policies. This is a welcome move which ensures that someone who has been sold a wrong policy can get out of it.

Bonus usage on claim – Many insurers deduct the bonus first on claim. Now, that would not be permitted if these guidelines come into force, as it proposes cumulative bonus deduction on claim needs to be reduced at the same rate it accrues.

Special provisions for Senior citizens – The guidelines brings in a senior citizen friendly provision. Guideline suggests that the premium charged to a senior citizen is fair, justified, transparent & duly disclosed upfront. In case of extra premium, clear written consent needs to be taken. Also, a separate channel needs to be established by TPAs/ Insurers to address claims/ grievances of Senior Citizens. This is a very welcome step in the guideline

Multiple policies – The guidelines clearly specifies how the policy holders can claim when they have multiple policies. The guideline brings in clarity & gives the policy holder the choice of getting the claim from whichever insurer, if they hold multiple policies.

In case of multiple fixed benefit policies, the insured can avail of benefit provided by all policies. In case of Indemnity policies, insured can choose a policy for claim settlement & that insurer cannot insist on contribution clause as long as the claim is within the policy SA limits. If the claim amount is more than the SA in a single policy, the insured can choose another policy for claim settlement where contribution clause will apply. This means one can now use the employer cover when needed for ease of settlement, without them bringing in the contribution clause.

Loading – Loading on renewal to be based on objective criteria applicable to everyone not just an individual. No fresh underwriting to be insisted upon, if SA remains the same.

Settlement/ Rejection of claim – Insurer is to settle or reject claims within 30 days of last necessary document. This guideline ensures timely settlement of claim. Also, claims lodged beyond the provided period to be considered, if there are valid reasons for late claim.

Portability – The guideline provides further clarity on portability of policies. Portability should be opted for 45 days before policy comes for renewal and not before 60 days. If the outcome on portability is still due at renewal date, the policy can be extended on a pro-rata basis for 1 month or more, which is a welcome move. Existing insurer cannot cancel the policy till the time a new policy is issued, which again is a policy holder friendly move.

Policy holder may opt to continue with existing insurer before expiry of policy or short period. Portability would apply to the extent of the SA + Bonus accrued in the current policy. Also, on receipt of info from the existing insurer, the new insurer needs to give it’s verdict in 15 days; else it is deemed accepted making the whole process timebound.

Combi plans – Health plus life combi products will have a life & health insurance component. A life insurance and a general insurance company can tie-up and offer various combi products. They are to put in place systems and procedures for client servicing, IT systems etc. for effective functioning. Combi products exist and the guidelines seek to strengthen the existing framework.

Lead Insurer- In combi products, one of the insurers will act as the lead insurer & play a crucial role in facilitating policy servicing/ underwriting. However, the respective insurer will do underwriting. However, the lead insurer does not guarantee settlement of claim by other insurer. The lead insurer concept is to ensure one place accountability & one place contact for the policy holder, which is a good move.

Overall, the guidelines if accepted and implemented would make the health insurance landscape a more evolved place, which offers better rights to the policy holders and at the same time provides clarity & a framework for operation for the health insurers to operate. Such clear guidelines are the foundation on which a healthy industry can be built upon.