There has recently been an array of new ideas and customer-friendly moves mandated by the Insurance Regulatory Development Authority of India (IRDAI) in the Health Insurance sector. This has opened up new and welcome options for customers. Different service-providers have also contributed by opening up the field to innovative thinking and are offering products geared to fill in the gaps in the standard bouquet of health products available earlier. This field is now dynamic and rapidly-evolving, with many pleasant surprises awaiting customers at a time the Government is laying stress on universal health coverage.
Some significant changes brought in by IRDAI
- Arogya Sanjeevani
Following a circular in January of this year IRDAI that there must be a singular and standardised Health insurance policy to be offered by all insurers, the public domain is now abuzz with the possible changes round the corner in this sector. All general and stand-alone health insurers across the board are to offer a single policy with identical sum insured, terms, conditions and exclusions, not later than 1st April 2020. However, this circular was later modified and it was mentioned that this deadline would be relaxed for those insurers not offering indemnity-based health policies at this point of time. As and when these insurers start offering indemnity-based health insurance products, they would also have to offer this standard product. This new product would be referred to as “Arogya Sanjeevani” followed by the name of the insurer. The product would be a plain-vanilla product and would be convenient for customers as they would be spared from comparing multiple terms and conditions and add-ons presently offered by different insurers, which usually is quite confusing for ordinary customers. The new scheme would also allow seamless portability between insurers.
Another unique feature of this product is that the premium need not be paid in a lump-sum at the commencement of cover and payment options range from monthly, quarterly, bi-annual to annual payments. Payments through Electronic Clearance Service (ECS) with the use of auto-debit facility will also be allowed.
The minimum sum Insured under Arogya Sanjeevani would be Rupees One lakh and the maximum sum Insured will be Rupees Five lakhs. The policy may be issued on individual sum insured basis or on a floater basis to the family. The minimum age at entry is Eighteen (18) years and the maximum age is Sixty-Five (65) years with life- long renewability. The policy would be available for a period of one year on a pure-indemnity basis. Cumulative Bonus is available under the policy and the sum insured will be increased by 5% in respect of each claim-free year subject to a maximum of 50% of the sum Insured. On a claim being made in any particular year, the Cumulative Bonus accrued will be reduced at the same rate at which it has been accumulated. There is a fixed co-pay of 5% on all claims. There are also specified waiting periods for diseases as per standard guidelines and sub-limits for items such as room rent charges, and capping of sum-insured for cataract operations and for some specified procedures. Pre and post-hospitalisation benefit provisions are available. Other standard clauses such as Grace Period for Premium Payments, Portability and Free-look Period of 15 days are also available.
While this is a welcome step for customers who would often require only a standard cover shorn of add-ons, the sum-insured options appear to be somewhat inadequate. The sum-insured perhaps could have been allowed up to Rs. 10 lakhs, keeping in view the mounting costs of medical treatment, particularly in Tier-I cities.
There is also provision for pre-acceptance medical examination and loading based on health status and/or occupation and these underwriting criteria may differ across insurers. The premium is to be specified by the insurer concerned and presumably, this would be the main differentiator between the different insurers offering the same product.
The option of making premium payments in instalments will require the insured to be vigilant by close monitoring of the compliance of premium payment guidelines by her, throughout the policy period.
- Amendment of the definition of pre-existing diseases (PED)
The Regulator has modified the definition of PED and has stipulated that no disease will be treated as PED, even if diagnosed within three months or later of purchasing a health insurance product, by way of a circular in February of this year. However, this modification is not applicable in the case of Overseas Travel Insurance. This definition was included in the guidelines on standardisation in health insurance released by IRDAI on 27th September 2019.
While this will lead to lower rejection of claims and bring cheer to customers, it will also increase claims outgo and ultimately lead to higher premia.
- The option of Customers’ choice for health insurance Third-Party Administrators (TPA)
In December 2019, IRDAI vide the Insurance Regulatory and Development Authority of India (Third Party Administrators-Health Services) (Amendment) Regulations, 2019 stipulated that policy-holders will be allowed to choose their own TPA. As is well acknowledged, TPAs now play an essential role as they are the first point-of-contact when the insured applies for cashless authorisation for her hospitalisation claim. They are also thereafter responsible for processing the health claim (be it cashless or reimbursement) and for consolidation of documents from the hospital concerned and final quantification of the payable amount. However, they are not responsible for claims rejection or acceptance, which is the sole prerogative of the insurer.
It has been stipulated that henceforth, the policy-holders will be allowed to select the TPA at the time of purchase of the health policy or during renewal. A list of TPAs is to be provided to the policy-holder for his selection both at the time of offering the proposal and during renewal. This list will be restricted to the TPAs with whom the insurer has service-level agreements. It will also be specific to different products and the geographical location of the policy-holder (as all TPAs do not have an effective pan-India presence).
This arrangement represents a significant step forward for the policy-holder. She can utilise this option if she has had prior experience with a particular TPA. However, for those who are insuring for the first time or have not have made any claims against an existing policy, this option is not of any major significance. It will also be beneficial for the health insurance sector as a whole, as TPAs previously relied only on the insurer’s clearance for servicing policies but will now have to depend on customer preferences. Thus the TPAs will also have to be more conscious of their customer-handling and compliance of their service-quality levels. Presumably, TPAs who are unable to meet expectations of customers will slowly be weeded out by insurers.
However, it represents a challenge for insurers in actual implementation. Insurers with numerous offices pan-India such as the public-sector insurers typically divide their offices TPA-wise for convenient servicing and due to other administrative concerns. Numerous TPAs servicing the retail customers of a single office may cause organisational problems which the insurers will have to overcome.
- Health Coverage extended to cover many exclusions
In September 2019, IRDAI introduced new rules which aim at making health insurance more universal in scope and coverage. The Guidelines on Standardisation of Exclusions in Health Insurance Contracts specified that genetic diseases, psychological and neuro-developmental disorders, menopause-related disorders, age-related macular degeneration etc. are to be covered henceforth. Thus treatment costs of persons suffering from speech disorders and dyslexia will henceforth not be excluded. Injury or illness associated with hazardous activities, except those relating to sporting activities will also not be excluded any longer. Internal congenital diseases, genetic diseases and disorders will also be covered.
Whilst this provision will be welcomed by many, it would mean that many claims previously not entertained or rejected by insurers would now have to be paid. It will result in higher claims outgo and possibly higher premia in the long run, as insurers factor in possible claims.
- The Regulatory Sandbox (RS) Initiatives
Regulatory Sandbox usually refers to live testing of new products in a controlled environment. It is akin to a pilot project with the insurer free to withdraw the product in case of failure. However, it must not adversely affect customers who are already insured.
The IRDAI (Regulatory Sandbox) Regulations, 2019 intend to strike a balance between orderly development of the insurance sector on the one hand and the protection of interests of policy-holders on the other. The idea is to facilitate innovation. The RS will allow the participants, such as the Regulator, innovators and willing customers, to conduct field tests to collect evidence on the benefits and risks of innovations while simultaneously monitoring and restricting the risks. The IRDAI has invited applications for the RS for about a month last year. It is understood that many applications have been received out of which many health insurance-related applications are under scrutiny. Recent news indicates that many proposals involved the use of fitness apps for arriving at an appropriate premium. Some exciting innovations in this sector may be thus expected shortly.
- Wellness and Preventive Features in Health Insurance
Towards the end of last year, the Regulator issued draft guidelines on the above and mentioned that “Based on fitness and wellness criteria stipulated and disclosed, insurers may endeavour promoting wellness amongst health insurance policyholders by offering:
- i) Health specific services provided by Network providers or other empanelled hospitals / service providers for the following:
- Outpatient consultations or treatments
- Health check-ups/diagnostics
Including discounts on all the above by redeemable vouchers.
- ii) redeemable vouchers to obtain protein supplements and other consumable health boosters / supplements.
iii) redeemable vouchers for membership in yoga centres or gymnasiums for participating in fitness activities.”
However, all wellness features are to be filed with the product at the initial stage itself. However, the insurers were not to publish the trade names or logos or merchandise in any of their advertisements but may refer to the product etc. in generic terms.
The IRDAI has also said that the costs towards wellness services is to be factored into the pricing of the health insurance product and shall be disclosed in the relevant insurance advertisements. Therefore, transparency will be maintained in the pricing of wellness products. However, what remains to be seen is after incorporation of these wellness features how much it impacts the price of the insurance products and the customer response in this regard.
- New Regulatory initiatives on the anvil
According to IRDAI’s draft proposal, released in January of this year, “The objective of the guidelines on ‘Standardisation of General Clauses in Health Insurance Policy Contracts’ is to standardise the common general clauses incorporated in indemnity based Health Insurance (excluding Personal Accident (hereinafter referred to as PA) and Domestic /Overseas Travel) products covering Hospitalisation, Domiciliary hospitalisation and Daycare treatment to simplify the wordings of general clauses in the policy contracts and ensure uniformity and greater transparency.” The Regulator proposes to make these guidelines apply to all individual and group health insurance policies ultimately. This will help to remove many disparities in wordings and ambiguities in the interpretation of standard clauses in the health insurance industry and benefit customers hugely.
IRDAI is also planning to standardise the health claim settlement procedure and ensure payment in a time-bound manner, through a common portal. T.L. Alamelu, member (non-life), IRDAI was quoted as having indicated the plans of IRDAI in this respect at an insurance summit organised by Assocham in Kolkata on February, 14th, 2020. IRDAI has already formed a committee to examine the matter and the platform is to be developed by the Insurance Information Bureau. This platform will bring all the stakeholders in the health insurance space –insurers, the insured and hospitals on a common platform to standardise claim settlements and ensure timely pay-outs. It is intended that both cashless and reimbursement claims will be routed through this portal.
The charges for some standard procedures also present a lot of disparity between different hospitals. T.L. Alamelu was quoted as having said that “There is a mismatch (in pricing). IRDAI is thinking how to handle it. In this context, the General Insurance Council’s talks with TPAs are on course to standardise charges for some procedures such as cataract and hysterectomy.” This is a positive step in the right direction and the Regulator would be in a better position to negotiate with the dominant hospital lobby on behalf of the entire insurance industry, to the benefit of all stakeholders.
It is quite clear that these initiatives of the Regulator will bring in immense relief to the customers and also help in regulating the health sector.
The health insurance sector in India has grown and evolved to a large extent over the years. It is heartening to note that the current crop of Regulatory initiatives has encompassed diverse areas in the health insurance sector. While this is a welcome step for customers, it opens up challenges for insurers in many ways. Yet another area in which the Regulator could bring in standardisation is by mandating a standard benefit based critical illness policy, across the entire insurance industry, which will not only generate confidence in customers but also ensure complete financial protection for them. The aspect of medical insurance in overseas travel policies also requires a fresh look by the Regulator.