In a move that is likely to improve access to affordable health coverage, the Insurance Regulatory Development Authority of India may allow life insurance companies to provide health insurance plans.
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As per the report, discussions regarding this proposal have been on for a few weeks and the draft guidelines to sell indemnity health insurance products shall be released soon. IRDAI may also allow life insurance companies to sell health insurance plans by other companies or let them design as well as distribute health insurance policies.
While the confirmation of this proposal by the IRDAI is awaited, the move is likely to improve health insurance penetration in India. However, it can also raise competition among health insurers and life insurers.
As of now, a basic health insurance plan with a SI (Sum Insured) of Rs. 2 lakh costs a premium of Rs. 5,000 to Rs. 7,000 for a perfectly healthy adult below 50 years of age. As per the speculation, this health insurance premium may lower by 5% to 10% if this move is implemented and the IRDAI permits life insurers to create, price and sell health insurance.
Life insurance companies have large distribution networks, over 2 million individual agents, higher disposable cash, and thousands of physical branches, which may lead to competitive premium costs. As life insurers get more customers in retail space than health insurers, the move will allow more people to get coverage under different mediclaim policies.
Earlier, life insurance companies were barred by the IRDAI to sell indemnity health insurance plans. Out of the overall non-life insurance industry, health insurance accounts for around 33% of the total non-life insurance premiums.
If implemented, the move is also likely to boost insurance penetration in India. As per the Economic Survey conducted in 2021-2022, life penetration in India was 3.2%, whereas non-life insurance penetration was at 1%, with the global average being 4.1%
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