Insurnace: How new health cover norms can benefit you

The insurance regulator has proposed measures to bring transparency and standardisation in health insurance. Here's how they will impact you. PREETI KULKARNI      Following the Bombay High Court order in December last year, the Insurance Regulatory and Development Authority (Irda) had promised to draft guidelines to protect the interest of health insurance policyholders and make the system more transparent. Recently, the insurance regulator proposed certain norms, which could bring the much-needed standardisation in the industry. While some of the norms are already in place, there are several fresh proposals as well. Here's a look at the newer ones.  Step: 30-day deadline for claim settlement.  Impact:You can take insurers to task if the claim is not processed within 30 days of submitting the required documents. "While this was already a part of Irda (Protection of Policyholders' Interest) Regulations, 2002, it never found a mention in insurance policy documents. From now on, it will have to be included in the policy documents," says civic activist Gaurang Damani, who had filed the public interest litigation (PIL) in the Bombay High Court, demanding that regulations be framed for the health insurance sector. Irda had agreed to draft the guidelines as a fallout of this case.  Step: Specific reason required for denying a claim.  Impact: Since the insurance company has to give the reason for rejecting a claim in writing, it could bring down the instances of claim repudiation on flimsy grounds.  Step: Insurers to pay hospitals directly.  Impact: This may make the payment process smoother. "When the cheques for claim settlement were issued by the thirdparty administrators (TPAs), payments used to be delayed often. Besides, it was difficult to ascertain whether the TPA had passed on the entire claim amount approved by the insurer to the claimant," says Damani.  Step: Contribution clause will not come into play in the case of multiple policies.  Impact: Policyholders with two or more indemnity-based policies can make optimum use of their total coverage. Till now, a claim made on two policies was split between the two insurers in the ratio of the sum insured. "The policyholder will now have the option of choosing the insurer with whom the claim is to be settled," says Amarnath Ananthanarayanan, CEO, Bharti AXA General Insurance.  Step: Standardisation of cumulative (no-claim) bonus.  Impact: This will provide a better understanding of the benefits for every claim-free year. The Irda has asked insurers to state its workings explicitly in the policy document. It has also laid down norms for withdrawing this benefit in the event of a claim. The no-claim bonus can be rolled back at the rate at which it was offered or it can be included in the sum insured after charging the premium applicable to this additional cover.  Step: No arbitrary hikes in premiums.      Impact:You won't have to face any more nasty surprises at the time of renewal. Insurers can hike premiums only after explaining the reasons for it to Irda. They will have to justify it on the basis of the preceding three years' claims experience, expected claims experience, and the rationale for the proposed pricing.  Step: Loading policies to be more transparent.  Impact: You will know the likely premium increase in advance. "If your claims in each of the three consecutive policy years (except the current one) exceed 500% of the current premium, the insurer can hike the premium according to the predetermined table disclosed at the time of issuing the policy. This step will benefit policyholders immensely," says Segar Sampath Kumar, DGM, New India Assurance.  Step: Reward for good claim record and continued renewals.  Impact: You can hope for an enhanced cover or discounts on premiums for low claims and consistent renewal of policy.  Step: Reimbursement of some preinsurance check-up expenses.  Impact:Non-life insurers may have to reimburse at least 50% of the cost of checkups conducted before issuing the policy.  Step: Insurers to set up dedicated grievance redressal cells for seniors.  Impact:Senior citizens often complain about a raw deal at the time of claim settlement despite having paid premiums. So a dedicated channel will expedite the process of redressing such grievances. Seniors can now hope for a quicker resolution of disputes on premium hikes or claim repudiation.  Step: Insurers to provide a 'customer information sheet' containing key details to policyholders.  Impact:Since the information sheet will cover key benefits, exclusions and grievance mechanisms in simple language, it will help bring down policyholders' confusion on what they are eligible for.  Step: Non-allopathic treatment to be covered by insurers.  Impact:Those preferring treatment under alternative systems of medicine, such as ayurveda, unani and homoeopathy, can now get the expenses reimbursed if they opt for these. So far, most insurance companies had restricted themselves to expenses related to allopathic treatment. Some insurers extended coverage only if the insured person underwent the treatment at a government hospital, while others offered it only to their group mediclaim policyholders. The draft norms now allow insurers to cover such expenses if the treatment is availed of at a government hospital, an institute recognised by the government/accredited by Quality Council of India/National Accreditation Board on Health or other suitable institutions.  Irda guidelines that are      already in place  Issuance till 65 years: Insurers have to issue fresh mediclaim policies to individuals at least up to 65 years of age.  Lifelong renewability: New products cannot impose an exit age cap. They will have to be renewed throughout the policyholder's lifetime.  Renewal not to be denied on flimsy grounds: Renewal requests will have to be compulsorily accepted, except in cases of fraud, moral hazard or misrepresentation.  Customers cannot be forced to switch:  Insurers cannot compel a policyholder to shift to a new product if the latter finds its provisions to be disadvantageous to him.

SUCCOUR FOR SENIORS Insurers in fix over pricing health cover for 85-yr-olds

Mumbai: Insurance companies are in a dilemma over pricing health insurance policies for people over 85 years of age considering that there is no claims history for this group. 

    The need to introduce covers for this age has arisen because of new regulations that bar companies from having a maximum age for those who have been continuously buying insurance. There is also the likelihood that with the incidence of hospitalization rising with age, part of the burden may be passed on to younger buyers. 

    "The regulator has also brought personal accident and critical illness covers under health insurance. But these are benefit policies which provide a lump sum amount to make good a loss in earning. These covers may not be suited for older people for whom there is no income loss," said Shreeraj Deshpande, head of health insurance at Future Generali India. 

    According to T A Ramalingam, head of underwriting at Bajaj Allianz General Insurance, pricing policies for older people will be difficult since there is no data on the claims history. "We are asking our actuaries to start working on pricing policies for people up to 110 years of age since in future there will not be any exit age. While the number of people requiring hospitalization in that age group would be high, usually no major surgeries are performed on those above 85 years," he said. 

    While there may not be many high value claims, the frequency of hospitalization is expected to be very high in this age group which will push up the premium. But if even with high premium the claims ratio (the ratio of claims paid to premium) is more than 100% than other insurance buyers would end up subsidizing this group. 

    "If the higher cost is passed on to younger buyers, there could be a negative spiral with fewer young people buying insurance thereby pressurizing companies to raise rates further," said Deshpande. 

    Unlike life insurance where it is possible for insurers to sell long-term policies with "level" premium (paying the same amount over the years), non-life companies cannot sell 'level' premium policies. 

    One reason is that health covers do not provide fixed benefits; rather they make good the loss suffered by the insured in spending for treatment. 

    Health insurers say it is impossible to predict what will be the cost of health care after a few years. 

    "There are too many variables. Medical inflation itself is rising at 10-15% every year," said Ramalingam. 

    He added that companies also had to take a call on the extent to which they could increase premium for someone who claims consistently. In the new draft guidelines the regulator has said that if there is a claim insurance companies should reduce the cumulative bonus at the same rate at which it has accrued. Insurance companies can also continue with the bonus by charging a higher premium.