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The health insurance industry has been undergoing a metamorphosis for a while now and with the recent changes by IRDA or the Insurance Regulatory and Development Authority of India in the functioning of health insurance policies, it is aimed more towards the benefit of the insured. It is in fact aimed towards streamlining procedures and regulating policy norms so as to create a customer friendly win-win situation for both the insurer and the insured so that there is no conflict of interest.
A very significant change in the evolution of Health Insurance in India was brought about in October 2013, with the introduction of the Guaranteed Renewability of Health Insurance Policies in India for life with continuity benefits. This has heaved a sigh of relief for many, especially for people who did not have post retiral medical benefit from their erstwhile organization. But to understand what it entitles the policy holder, the pricing factor and the impact on insurers, we must delve a bit deeper.
Now, this was a welcome move for the insurers’ point of view as well, because continuous renewals only guaranteed renewability of the policy for life which meant a longer flow of insurance premium as well.
The Health Insurance Policy That Was- What Existed Before
Until the implementation of the changes in October 2013, health plans where stringent about policy renewal. Many were at a disadvantage when it came to policy renewal, and where often left in the lurch, unable to get a health cover. What determined a health plan renewal?
First, policy renewals depended on the claims made in the previus policy year. Insurers maintained a claim based loading when policies where renewed. This means, an increase in subsequent premiums if a claim was made. Such a practice made policies getting tighter on the pocket, and thereby many policy holders, failed to get adequate cover. Another important factor was age. Almost all insurance companies maintained an age cap for renewal of health plan. So if you crossed the age of 60-65 years, you would find it difficult to renew your health plan.
Current Changes - What it is now
The new age health plans now prescribe a guaranteed renewability, or in other words, a policy that is renewable for an entire lifetime.
The renewal is possible irrespective of what claims have been done previously, or the age of the policy holder. So, with this latest move of IRDA, you could get a health insurance cover even at the age of 65 years, getting in renewed through the course of your entire life.
Benefits to Policy Holders
v Easing of age restrictions: The biggest advantage of this move is the easing of the age restriction when it comes to policy renewals. For the senior citizens, who earlier were being denied of a health cover, the removal of age restriction is a sure boon. They could now have a health cover to meet medical emergencies, at the time in their life when they need it the most. Insurance companies maintain the following age criteria for health policies (may vary from insurer to insurer).
- Minimum entry age: 3-5 years
- Maximum entry age: Aanyone up to the age of 65 years can buy a health insurance product.
- Maximum age of renewability: Lifelong
Continuous Cover: Where earlier renewals were permitted only till the age of 65-70 years, with a lifelong renewability option you could now be ensured of continuous health coverage, with no ceasing age. Thus, as a policy holder you wouldn’t be left at any point in the lurch, without health protection.
Impact on Health Insurance Policy Premium
With the changes implemented, the premiums of health plans have shown an upward movement. For the policy holder now, the same health plan, costs more, with the premiums being pushed higher by 25 to 25%. We could explain this surge from the insurance company’s point of view. Most insurance claims are above the age of 60 years. As one becomes older, the probability of contracting an ailment is much higher. The insurer thus, faces a higher risk of settling claims. Also, they cannot quote high premiums beyond a point for the senior age group. This thus, puts a lot of pressure on the insurer to price the product.
Apart from this, IRDA’s abolition of claim-based loading on subsequent premiums also plays a role in pushing the premiums higher. Claim based loading earlier allowed insurers to raise premiums in the subsequent year, in case of a claim in the previous year. The new rule now does not permit this.
To offset the above two points, insurers need to increase the premiums on the basis of their individual total claim experience. This thus trickles down to the younger age group, pushing their premiums much higher.
IRDA’s latest move has brought about mixed feeling in the insurance sector. Where, on one side it is appreciated by many policy holders especially the senior citizens, many others are not too satisfied with the outcome of increased premiums. Nevertheless, the standardisation and streamlining the changes have brought about is a sure advantage. Looking at the protection point of view, insurers can now refuse a policy, only in case of an adverse health condition.
Thus, with retirement planning, choosing the best health insurance policy for yourself which can be continued for life, is a post retirement health insurance coverage solution for individual and family.
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