A ‘healthy’ turn to innovation in insurance


A ‘healthy’ turn to innovation in insurance [Economy]

  • In July 2016, the Insurance Regulatory Development Authority introduced several regulatory changes to health insurance. Such regulation has the potential to change the way risk, indemnity and other insurance products have been traditionally covered.
  • Five new changes:
    • A. New Products
      • Previously, insurers required prior IRDA approval to withdraw products in the market and were therefore reluctant to introduce new products.
      • The new regulations allow insurers to roll out products on a pilot basis and allow them the flexibility to even withdraw them after 5 years, without procedural hassles.
      • The regulator has also brought in transparency in mandating minimum payouts and product information, enabling a menu of offerings across health insurance products, portability and easy withdrawal of pilot products.
    • Wellness credit
      • To promote wellness & preventive health care, insurers can offer discount on renewal premium in case of demonstrated improvement in health.
      • However, parameters that qualify for improvement have to be disclosed upfront in the product prospectus.
      • Insurers can now promote and cross-sell outpatient consultations or treatment, pharmaceuticals or health check-ups offered by the insurers network providers (hospitals and clinical establishments) and offer discounts in cashless transactions.
      • Though 2013 regulation brought access to insured availing of non-allopathic treatment or AYUSH, the move has set us par with regulators in U.S. & U.K.
    • Health vs finance
      • Life insurers can no longer offer pure indemnity-based products which assure a sum at the end of tenure.
      • It used to resemble financial protection plan rather than health risk cover.
      • The aim of the new regulations seems to be to de-link financial protection-type plans from health insurance products and restore the primary objective of providing pure health cover under health insurance.
      • It allows the health-life product players to compete on annual pricing, product packaging and rewarding good behaviour of the insured such as early subscription to a plan and continued attachment to the provider.
    • ‘Group’ definition
      • Prior regulations stipulated that there should be a commonality of purpose as well as an economic or non-economic relationship among group members.
      • Separate guidelines governed the group, group agent and the group insurer.
      • The new regulations mandate that the minimum size of the group be fixed at 7 as compared with the arbitrary decision left to the discretion of the insurer, earlier.
      • This is a significant step towards sanitising the competitive group insurance market.
    • Renewal norms
      • The renewal norms have also been made less stringent.
      • An insurer shall not resort to fresh underwriting of his risk by calling for a medical examination or a fresh proposal form at the renewal stage of policies.
  • New health insurance regulations, cognisant of dynamic market realities, enable players to innovate and compete in the health insurance ecosystem.
  • It balances customer protection and the commercial interests of the insurers.