The insurance regulator recently issued a draft on standardizing and rationalizing exclusions in health insurancepolicies. The draft seeks to redefine terms such as pre-existing ailment to remove ambiguity, seeks to include new lines of treatment due to medical advancement, besides making other customer-friendly recommendations such as giving insurers an eight-year moratorium after which a policy is not contestable except for proven fraud and permanent exclusions. Disha Sanghvi asks experts if such recommendations by Irdai will have the unintended consequence of making health policies costlier.
Welcome step for consumers but premiums may increase
The draft guidelines issued by the Insurance Regulatory and Development Authority of India (Irdai) aim to promote a uniform approach while incorporating exclusions in health insurance products.
Irdai has specified 12 conditions which cannot be excluded. The prominent ones among them are treatment of mental illness, stress or psychological disorders, diseases contracted after a health insurance policy and internal congenital diseases and genetic disorders. There are 17 diseases which can be permanently excluded; these include AIDS and chronic kidney or liver disease.
While this initiative is welcome from a customer’s perspective, the premiums could rise as some of the conditions which cannot be excluded under the proposal are currently not covered by insurers. The exact impact on the price increase might be known only at a later stage as insurers gather the required data to assess the impact of covering these conditions.
—Subramanyam Brahmajosyula, head, underwriting and reinsurance, SBI General Insurance
Insurers will first analyze impact of covering listed diseases
Irdai’s draft for standardization of exclusions has four parts. First is a list of medical conditions which are to be mandatorily covered under health policies, second is a list of pre-existing medical ailments which can be permanently excluded with consent from the insured when the policy is issued. Third, Irdai has prescribed standardization in certain permanent exclusions across insurers, and finally a few procedures carried out as a result of advancement in technology may be covered.
Once the regulator releases the final regulations on the basis of this draft circular, we (insurers) shall internally analyse the impact of covering these ailments for each of our products and then decide on pricing. For extending coverage for mental illness, behavioural and developmental disorders or genetic disorders etc., there are various factors involved in deciding the coverage and price such as age, gender and the line of treatment that the person is undergoing.
—Gurdeep Singh Batra, head, retail underwriting, Bajaj Allianz General Insurance
Health cover pricing will be a combination of many factors
The Irdai draft is good news for both the insurers and the customers. With standardized policies, there will be clarity among customers in terms of what is excluded and what is included. Also, the insurance companies will be able to cover more people as less exclusions will allow them to offer protection to a larger set of the population.
After eight years, insurers cannot deny a claim on account of any health constraints. Technically, any rejection can happen only on account of potential investigation or fraud. That is a safety net for customers. Also, now the regulator has specified a list of 17 exclusions. These can be the only exclusions in any health insurance plan. But insurers have been given the right to underwrite permanent exclusions; so if they want to underwrite heart-related illnesses or diabetes as a permanent exclusion, they can.
Pricing will be a combination of a lot of factors and it’s difficult to say right now where premiums will go.
—Tarun Mathur, chief business officer, general insurance, Policybazaar.com
Any hike in premiums will be worth the added benefits
Ibelieve that health insurance helps people to live a better life. Therefore, it is of utmost importance to make sure we create an environment where more people get covered. Irdai’s effort towards standardization is a step in the right direction and we believe it would help the industry to enhance penetration.
We believe in risk-based premium for all our products. Risk premium for each age is taken into account and the same is incorporated while we finalize the premium amount for our products. With the introduction of standardization or reduction of exclusion we would not be in a position to forecast the change right away, but will surely keep a watch on the change in the risk premium or the claims experience to decide if there is a need for premium change.
Given that these changes will simplify the policy and increase the coverage, any small increase in premium is still likely to be worth the significant improvements in benefit.