Insurance regulator Irdai has said it prefers the cashless mode in health insurance over the reimbursement mode.
During the latest edition of ‘Bima Manthan’, held on March 1 and 2, the health insurance consultative committee presented its findings on increasing penetration of health insurance and increasing efficiencies in claim servicing, according to a release issued on Friday.
The immediate, short-term and medium-to-long-term steps were discussed. The need for prudent health ecosystem collaborations to take the health insurance forward was highlighted. Irdai stressed upon the preference to cashless mode in health insurance over the reimbursement mode. One of the major focuses of the event was prompt claim settlement and speedy redressal of grievances. The regulator emphasized ‘EASE’ — Enhanced Access and Service Excellence — in delivery of insurance services, in line with the banking industry.
It envisages creating an environment which provides ease to the policyholder in approaching the insurance company, be it for purchasing, servicing or receiving claims or lodging any complaint or grievance and that the insurance companies must strive to provide maximum excellence in their service delivery,” the regulator said, adding that the enhanced responsibility on insurance companies as well as councils to ensure best market conduct practices and market ethics maximising customer satisfaction was spelt out.
Irdai mission mode teams on risk-based capital, risk-based supervision framework and convergence to Ind AS/IFRS presented the progress made in the respective areas. The transition to the India model of RBC & RBSF and adoption of Ind AS is possible only with the active role and participation of the industry, and thus the expectation from the industry including continued participation in data submission, testing and pilot stage, prompt responsiveness, better synergies, etc. were highlighted.
Life insurance is one of the most important risk mitigation tools that everyone should get as soon as they become eligible for it. Life insurance financially supports the dependent family members of the insured. So, you must stay adequately insured during every stage of your life. The more you delay in getting a life insurance coverage, the costlier it gets because a higher age results in a higher premium for life insurance. However, if you have already taken a life insurance policy, its premium usually remains the same throughout the policy period.
The premium rate is usually revised for policy buyers of all age categories. If you are planning to get a life insurance cover for the first time or are looking to enhance the size of the existing cover, you should not delay because the premium for life insurance policies may become costly now. Here are some key factors that are going to impact the life insurance premium.
Due to the sharp rise in claims in the last few years
The life insurance premium is normally decided based on the life expectancies of the insured. However, during the Covid pandemic, a sharp rise in claims was witnessed by the entire insurance industry. Due to higher-than-normal insurance claims, the reinsurance companies are now left with no choice but to increase the premium levied on the insurance companies and in effect the insurance companies are expected to transfer the cost on the customers by increasing the premium for life policies.
Due to ageing, changes in lifestyle and habits
A large number of people are now working from home which leads to a sedentary lifestyle and invites ailments like blood pressure and diabetes. Deterioration in health conditions or habits like smoking, consuming alcohol, etc. can result in an increase in the premium for your life insurance policy. So, if you have not yet taken a life policy and living a sedentary lifestyle, your life insurance premium may go up. Also, with an increase in your age, the policy premium rate also goes up when you are buying a new insurance policy.
Increasing the cover size at a later age
Getting a life insurance cover at an early age can cost you lesser than buying a policy at a later stage in your life. Sometimes, people get a life insurance policy based on their current financial needs and without estimating their expected financial obligations in the future and later they feel the life cover to be inadequate. So, if you find your existing life cover to be inadequate, getting an additional life cover can get costlier if you delay the decision further.
What should you do?
If you are an existing life policyholder and not looking to enhance the cover size, you need not worry and continue to pay the premium without any delay. If you are an existing policyholder but planning to enhance the cover size, you should act fast because the premium may increase significantly in the near future. If you have not yet purchased the life insurance cover, you should immediately get the appropriate policy and lock the premium at the current applicable level. While buying an insurance policy for the first time or enhancing it, beware of inflation and the rise in the interest rate on loans. Higher interest on loans means higher EMIs and an increase in your debt obligation simultaneously increasing your insurance requirement. So, do your math before deciding the size of the insurance cover. While choosing the insurance policy beware of factors such as claim settlement ratio, add-ons, tenure of the cover, etc. A life insurance policy gives you and your family financial security, and this security is possible only if you choose the correct sum assured. So, whatever you do, ensure that your sum assured is ample before you buy a policy. Finally, remember that life insurance is an essential financial tool, and you need it irrespective of the premium being costly or cheaper. So, better make an early move and ensure the financial security of your dependent family members.
Life insurance is a basic financial need that should be a part of one’s financial planning. Life insurance helps safeguard one’s family and oneself against two types of financial risks – untimely death and old age. The untimely death of a breadwinner places a family at a risk for future livelihood expenses and the risk of living too long or old age is that during retirement years the income-generating capacity of an individual reduces significantly.
Protecting future income is very critical at every age of an individual. Further, the protection needed also needs to be assessed periodically to ensure that the amount of protection is in accordance with the individual’s current income, lifestyle and future needs. India has always boasted a younger population, however, every year this younger population” keeps ageing. To put this into perspective; India has one of the largest millennial populations, estimated at 426 million, and is approximately 34 per cent of the total Indian population and forms approximately 47% of the total workforce. This generation has started hitting the age group of 40 and within the next 10 years, the majority of this population would be in their 40s. The Pandemic has also raised awareness levels in the last 2 years. Many individuals hitherto resistant towards insurance are open to discussing and buying insurance now, especially individuals with families along with liabilities like home loans, etc. A large portion of this customer segment is in the age bracket of 40-45. It is very critical to evaluate one’s insurance needs and decide the best insurance solution when looking to buy insurance while in this age group.
1. Term Life Insurance Policy:
Since they are currently breadwinners with higher disposable incomes this group has a much clearer sight of dependents, future expenses and liabilities. Thus, in cases where an individual has not taken a protection policy earlier, it becomes very crucial to take one at this stage to safeguard family needs. Further, even for individuals that have existing life insurance plans it is essential to reassess one’s “human life value” and take additional protection.
2. Annuity or Pension Plans:
Without considering the disruption brought by covid over the last many years life expectancy has increased; clubbed with a higher standard of living and the need to be independent sufficient pension planning has become more critical. In fact, the 40+ age group is ideal to invest in a pension or annuity plan.
3. Savings plans – ULIPs and Endowments:
Depending on the risk ability and need for future savings for milestones, especially linked to children, individuals can consider Savings cum protection plans available. Buying insurance policies for children remains the most popular in this age group.
4. Additional benefits and Riders:
Customers can also take plans that come with additional riders like critical illness riders, disability and accidental death. This age group is more aware of the need for protection against various risks and we have seen individuals seeking out plans with additional benefits despite the added cost.
Important factors to be aware of while making the purchase decision
1. Age factor in case term plans:
Depending on the policy features, Sum assured availed and term the premium can be much higher than that for a younger person. For pure term covers the premium can be anywhere between 1.2 to 2 times the premium for an individual in the age bracket 30-35. However, it is more important to note that risk also increases with age and the increased premium should not be a deterrent to taking sufficient risk cover if one can pay the premium.
2. Term:The term for which life cover is usually taken should match the earning age of the customer. However, there are many policies that provide term cover up to a higher age and even for whole life. Decisions can be taken based on earning capacity.
3. Medical Underwriting:
As mentioned above risk increases with age and an individual might need to undergo medical examinations depending on Sum Assured and previous medical history. It is crucial that the customer is aware of the medical requirements and undergoes the underwriting requirements to prevent any future hurdles in claim payments to the family.
4. Deciding the most appropriate sum assured:
This is based on one’s human life value calculations and can also depend on existing insurance policies and needs. Being underinsured can have severe impacts on a family’s future in case of an unfortunate eventuality. It is very critical to note that it is never too late to avail of the security brought by insurance protection for one’s family despite the added costs. However, when one buys insurance at an age over 40, the customer needs to ensure that they are taking the plan that best suits their needs and provides sufficient coverage based on the current financial situation.
Individuals with mental health conditions, HIV/AIDS and disabilities will soon have access to insurance covers designed specifically for them.
The Insurance Regulatory and Development Authority of India (IRDAI) has recently mandated insurers to cover these conditions under a model product framework that it has devised. It is a model setting out the minimum scope and parameters for design of the product. In other words, insurers may widen the scope of this product, but in no case can the scope of product be narrowed down.
A model schemes
In India, regulations in place already mandate that mental and physical illnesses be treated on par.
The Mental Healthcare Act, 2017 came into force in May 2018, prompting the Insurance Regulatory and Development Authority of India (IRDAI) to direct insurance companies to comply with the provisions.
However, individuals with these conditions continue to face challenges while buying health covers. Depending on the severity of the condition, insurers can choose to reject the proposals too.
Now, however, the insurance regulator has taken another step towards ensuring coverage for people with mental health issues, HIV/AIDS and disabilities. It has come up with a model product construct for offering coverage specifically to those suffering from these issues. Also, companies will now have to put in place board-approved underwriting (process to ascertain risk and determine premiums) policy for extending coverage to such lives.
IRDAI’s mandate for bringing in force a board-approved underwriting policy to ensure that no proposal is rejected on the grounds of these diseases is a pro-customer move. India has 6-7 percent of the population suffering from mental disorders. The move will bring transparency and offer a wider choice of health insurance plans to the customers.
This product will be on the lines of standardised products, such as Aarogya Sanjeevani, Corona Kavach and Saral Pension mandated by the IRDAI earlier. However, in this case, insurers can introduce features and benefits beyond what they are bound to, as per regulations. Put simply, the chances of people in this category obtaining health insurance coverage will go up.
Coverage for pre-existing disabilities, mental health conditions and HIV/AIDS
Insurers will have to get down to designing products with the model scheme released by IRDAI in mind. This is a cover specifically for people with mental health conditions, HIV/AIDS and physical disabilities; so, the pre-existing conditions are known. It is a good initiative as it ensures transparency. Inadequate disclosures create challenges for insurers at the time of claim settlement. We are studying our claim experience around such lives and working on the structure and pricing.
Besides these known pre-existing conditions, insurers will also take into account other health issues. “For instance, if someone has just suffered from a heart attack, there could be a cooling off period. Or someone could be undergoing cancer treatment, which will have to be factored into the medical underwriting,” he adds. Though HIV/AIDS, mental ailments and disabilities will have to be covered, other illnesses could still lead to denial of coverage under this product. Industry-watchers say premiums could be on the higher side. Premiums are bound to be steeper as the pre-existing conditions are known upfront and risk is higher.
Key features and restrictions
The sum assured (SA) options under the model product construct are Rs 4 lakh and Rs 5 lakh. Available as an individual, reimbursement-based product, adults in the age group of 18-65 years are eligible to make the purchase. Covers can also be bought for newborns and minors up to the age of 17.
The minimum degree of disability to be eligible for this product is 40 percent, as certified by government authorities, in line with the Disability Act, 2016. Nearly 20 disabilities listed in the policy fine print that will be covered include blindness, hearing impairment, mental illness, cerebral palsy, Parkinson’s disease and muscular dystrophy.
In addition, those with HIV/AIDS will also be covered. At present, proposals of those suffering from HIV/AIDS could be declined straightaway by insurers. Now, IRDAI’s move will ensure that health insurers give such individuals a fair opportunity to obtain cover.
Hospitalisation, day care covered but sub-limits will apply
It will cover hospitalisation and day care expenses. However, room rent is restricted to 1 percent of the SA, while ICU charges are capped at 2 percent. Cataract treatment for such individuals will be capped at Rs 40,000.
The waiting period for pre-existing diseases – other than disabilities and HIV/AIDS declared in the policy – will be 48 months from the date of policy issuance. More importantly, the product comes with a 20 percent co-pay – of the approved claim, the patient will have to bear 20 percent of the expenses before the insurer chips in with the rest.
A cover designed specifically for those with HIV/AIDS, disabilities and mental health ailments will send the right message to individuals as well as the insurance industry. It comes with co-pay and sub-limits, which is not ideal, but is still a better option than not being covered at all.
However, from the individuals’ perspective, the verdict on whether such a product will be useful or not will also depend on the affordability. I f the premiums are prohibitively expensive, the purpose of rolling out a model product construct and mandating coverage will be defeated.