IRDA to Come Up With a New Health Insurance Framework

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Health insurance will penetrate deeper with the new health insurance framework that proposes buyer-friendly changes. Insurance buyers will now get health saving accounts, single-premium policies and long-term offers.

Employers can now get long-term group health insurance policies for their employees which are just limited to annually renewable contracts at present. These proposals are well thought-out by Insurance Regulatory & Development Authority of India (IRDAI) for its new health insurance framework, said senior officials.

According to the amended Insurance Act 2015, health insurance is recognized as an independent vertical, distinct from life and general insurance. The review of the health insurance guidelines totally follows the guidelines of the act.  

The modified regulations are expected to be released soon, bringing relief to the customers. With single premium and long-term health plans, policyholders can lock into the premiums for a longer term at a time when medical inflation is growing every year. Plus, it is also a good sign for insurers as they will get loyalty for longer periods.

"A need was felt by IRDAI to revisit various areas of the health insurance framework such as products, distribution, actuarial related matters like pricing, claims experience, solvency, M&A, rural and social obligations, etc., so that the entire processes are streamlined to cater to the growing demands of the market for health insurance and also to enable companies to gear up well for meeting such demands in terms of innovation and servicing capabilities," said Ajay Bimbhet, managing director, Royal Sundaram Alliance Insurance.

The new framework projects that the health savings account will create a fund over 5-15 years and long-term health policies could carry tenure of 3-5 years to finance insured's healthcare expenses during their post-retirement years.

"Out of say Rs 50,000 premium that the policyholder will pay, a small portion — around Rs 3,000-5,000 — will go towards buying a high deductible risk cover, with the rest being invested to create a corpus. No premature withdrawals will be permitted from this fund for meeting personal expenses," said a senior executive of a private insurance company, on the condition of ambiguity.

High deductible covers, or top-up plans, get activated only when the base health cover is worn out and thus, are cheaper.

"Many individuals avoid buying health insurance as it does not offer 'returns'. Products like health savings account will help bring such individuals into the health insurance fold," the senior official said.

Source: This article has been adapted from the article "IRDA draws up framework to widen health insurance reach " that appeared on Apr 3, 2015 in economictimes.indiatimes.com.

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