(HEALTH INSURANCE)REGULATIONS, 2016&2013: Changes you should know

THE INSURANCE REGULATORY & DEVELOPMENT AUTHORITY’s

(HEALTH INSURANCE)REGULATIONS, 2016&2013: Changes you should know

Insurance, as defined in the Oxford Dictionary,is “An arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium”.[1]

A contract whereby, for specified consideration, one party undertakes to compensate the other for a loss relating to a particular subject as a result of the occurrence of designated hazards.[2]

Regulation of Insurance in India:

Insurance in India is governed by the Insurance Act, 1938 under which the Insurance Regulatory and Development Authority (“IRDA”) is formulated to further regulate and develop insurance in India.There are several kinds of insurances like life insurance, health insurance, property insurance, motor vehicle insurance etc. out of which one of the most common insurance that attracts utmost attention of the IRDA is the health insurance. To regulate health insurances IRDA has formulated the IRDA (Health Insurance) Regulations which have been reviewed and amended several times.

IRDA has recently Introduced the IRDA (Heath Insurance) Regulations, 2016 replacing the IRDA (Health Insurance) Regulations, 2013. With the introduction of the new regulations IRDA has addressed several grievances and issues faced by the consumers of Insurance. With the introduction of the new regulation several regulatory changes have been made in the field of Health Insurance. The regulations are now more consumer friendly and strict for the insurance companies and agents.

IRDA’s (Health Insurance) Regulations, 2016:

Some of the major and important changes brought by the IRDA’s (Health Insurance) Regulations, 2016 to the existing regulations of 2013 are:

1) Improved transparencyand Data Disclosures:

The insurance companies maintain records of all the repudiated and closedclaims, andpresent such records to their customers. While doing so, the rejected claims which couldn’t be paid back due to incomplete documentation or failure on the policy holder’s part to follow up with the insurer are put in the category of closed claims. A high number of closed claims allow insurers to project a lower percentage of rejected claims which misleads the consumers. Thus, in order to eliminate such malpractices, the new regulations have prohibited the insurers to close claims in their books.

2) No commissions to agents on portability of Insurance Policies:

Health Insurance Portability is a scheme through which policyholders can transfer their existing health insurance policies from their current provider to another provider. With the introduction of the new policy, the insurance agents will not earn any commission if customers choose health insurance portability. They will, however, continue to earn commission when a policyholder renews the same insurance policy regularly.

3) Availability of Combi plans that can combine any Life and Health insurance:

Earlier there were several restrictions on combi plans, however, with the introduction of the new regulations, health insurers can now offer combi-plans which can be a combination of any health and life insurance plan.

4) Discounts to Early buyers and Health conscious customers:

Insurance is considered as an investment to secure one from the uncertain future. People who are young, usually do not invest in health insurance. Thus, to encourage the youth to buy health insurance the new regulations have provided provisions for discounts to the early buyers of insurance who buy insurance in their young age, maintain wellness habits and renew their policies regularly.

5) Loan/ Credit linked Health insurance:

Term insurance based on an individual’s existing loan or credit is offered by many insurance providers. The benefit provided by these plans is dependent on the condition that upon the death of the insured, their nominee can utilize the claim amount of the policy to pay back the loan. These policies however do not give any such option in case the insured has fallen ill and is unable to repay the loan amount due to the sudden medical expenses which he has to incur towards the illness. The new regulations do provide respite in this regard, which means that health insurance companies will now be offering credit linked group health insurance products which will be for a maximum term of 5 years.

6) Life Insurers restricted to offer indemnity products:

There are two kinds of health insurance policies, Indemnity Plans and Defined-Benefits Plans. In Indemnity Plans on happening of an uncertain event or illness leading to medical expenses, the insurer reimburses the actual expenses incurred during hospitalisation up to the sum insured in the policy, however, there is also a co-payment clause wherein the insured himself is required to a certain percentage of the amount, let’s say 20%. On the other hand, in Defined-benefits Plans the entire benefit defined in the policy will be fully paid on happening of the predefined ailment. Following the new regulations, life insurance providers will no longer be allowed to offer indemnity products. Customers currently holding such policies will continue to have them until the respective policy expires. In order to meet the expected claims raised by such policies, insurers have created adequate reserves. This is done to ensure that the existing policyholders will not suffer in terms of policy servicing and claims processing.

7) Health insurance companies can now offer Pilot products:

To ensure that the consumers are provided with better products and more security to their future IRDA’s new regulations governing Health Insurance now allow health insurance companies to offer pilot products to test the market. Insurance companies can now create new and better policies for their customers, and can offer them momentary policies which will be offered to policyholders for a maximum period of 5 years, following the expiry of which, the products will go back to functioning as regular health insurance products. The continuation of the pilot product for a term of 5 years is solely dependent on its feasibility for the health insurance company. If the product is feasible, it will be converted to a regular health insurance product at the end of 5 years, and if not, the company can discontinue it.

However, as an exception to this rule any such pilot product should not be detrimental to the interest of the policy holders.

8) Cumulative Bonus:

There was a restriction on the insurance companies to offer cumulative bonus to their policy holders. The new health insurance regulations of 2016 have removed the said restriction and the insurance companies can now offer cumulative bonus to their policy holders. By introduction of this provision the policy holders will now be able to increase the sum insured by earning benefits over years. However, a claim made in any particular year would reduce the cumulating bonus accordingly.

IRDA has brought revolutionary changes to the Health Insurance market with the introduction of the new Health Insurance Regulations, 2016. Some of the changes listed above are clearly beneficial to consumers, however, some changes which have tentative and non-definite bearing may be detrimental to their interest. The idea is to bring changes in the existing health insurance market that benefits the end users the most. With the dynamic nature provided to the new regulations it is most likely perceived that the said regulations will benefit the consumers of health insurance and would provide them with a better platform for securing themselves from unforeseen ailments.

Utkarsh Thapar

(Counsel)

(Ricky Chopra International Counsels)

[1] Oxford Dictionaries, https://en.oxforddictionaries.com/definition/insurance retrieved on 30.01.2018 at2:49pm.

[2]https://legal-dictionary.thefreedictionary.com/insurance retrieved on 30.01.2018 at 2:57pm.

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