While health care is one of the basic needs of a human being, healthcare services form an important part of the backbone of a country’s economy. And, insurance is a key element in the whole healthcare ecosystem. India's healthcare system is developing and growing at a brisk pace on the back of increased expenditure by people on medical services.
In India, health insurance was first introduced in 1948 when the central government introduced the Employees' State Insurance Scheme for blue-collar workers employed in the private sector.
Major milestones brought by Irdai in the health insurance sector A new era marked the beginning of the health insurance sector post-liberalisation in 1999, when the Insurance Regulatory and Development Authority of India (Irdai) was formed following the recommendations of the Malhotra Committee Report. It opened the insurance industry to private players.
In 2007, Irdai introduced separate licences for companies to set up a standalone health insurance firm. This was a game-changing move for the industry, as it led to better product pricing, more choices for consumers, stronger bank-agency partnerships and strengthened distribution network overall.
The move paved dividends, as health insurance became the second-largest business after motor insurance in the general insurance category in India. This was also the beginning of social security, through insurance, becoming a priority for the regulator, as term life insurance also started gaining ground in India.
Health insurance premiums have grown from Rs 741 crore in 2001-02 to Rs 37,000 crore in 2017-18. The industry is expected to grow at a rate of 24-25 percent over the next 5-6 years and is projected to reach Rs 100,000 crore in 2022, according to Irdai’s report of the Working Group for Standardisation of exclusions in health insurance sector in India.
With the increase in the number of companies in health insurance sector, the number of products in the market have also increased substantially. Health insurance companies have brought several disease-specific plans which are based on the requirements of a modern-day consumer and their lifestyle. For instance, today there is a diabetes-specific cover, as well as cancer and a heart care product that offers significant protection against these critical ailments, at different stages of illness, and you can enter these plans at an age as high as 65 years. These are lifelong renewal plans.
Irdai further reformed the sector in 2012 by abolishing the practice of loading premiums for consumers, if claim settlements were existing in the previous instance. Also, around the same time, Irdai introduced another important reform, ensuring consumers were not denied renewal on their existing health insurance plans. In short, they made health insurance a lifelong product. Earlier, the practice was that if more claims were made, insurers could deny renewals or either increase the price. This was an important change that instilled confidence among consumers that health insurance can truly serve their needs. The insurance density of the non-life sector in India reached a peak of $13.2 in 2016 from its level of $2.4 in 2001.
Continuous collaborative approach to transform process
Continuing on its reforms, the Irdai formed a joint working group in July 2018, which had stakeholders and representatives from Niti Aayog, Ministry of Health and Family Welfare, health insurance companies, brokers associations, life insurance companies, general insurance companies, agents associations, reinsurance companies, consumer associations, actual representatives from insurers as well as reinsurers.
The regulator brought together people who were specialists from different domains and worked with them to create a roadmap to improve the penetration of health insurance in India. This group used information from the complaints customers had raised and worked with Irdai to make the product and processes consumer-centric. What makes this collaborative approach genuinely transforming, is how Irdai has been able to proactively engage and involve all relevant stakeholders, right from the consumer, to distributors, and insurers, for implementation of new-age norms, which is making health insurance a consumer-friendly product.
New guidelines bring more clarity
There has been a lot of ambiguity around what all is excluded in the health covers given to a customer, but recently in September 2019, the Irdai released guidelines on exclusions in health insurance contracts. The new guidelines have paved the way for transparency and removal of grey areas around inclusions and exclusions of the product.
Earlier, there was an ambiguity about the definition of a pre-existing disease (PED). PED is an ailment or disease that already exists at the time of buying a health insurance policy. Defining a PED has made the claim process more efficient. According to the new guidelines, any disease or ailment that is diagnosed by a physician 48 months prior to the issuance of health cover is now classified under PED.
Also, any disease/s or ailment/s for which any type of medical advice or treatment was recommended by a qualified doctor 48 months prior to the issuance of the policy now also qualifies under PED. Apart from this, any condition whose symptoms or signs have resulted within three months of the issuance of the policy gets classified under PED.
In addition to it, with the new guidelines, Irdai has brought clarity on what diseases or ailments cannot be excluded from a policy. These include illness associated with hazardous work activity, artificial life maintenance, treatment of mental illness, age-related degeneration and internal congenital diseases. Age-related ailments such as cataract surgery, knee-cap replacements, Alzheimer’s and Parkinson’s would also have to be covered.
Also, many exclusions won't be allowed by insurers in a standard health insurance policy including treatment of mental illness, puberty, and menopause-related disorders, behavioural and neuro-developmental disorders, stress or psychological disorders, diseases contracted after a health insurance policy and internal congenital diseases and genetic disorders.
There is also clarity around permanent exclusions. Irdai has made it clear that insurers are free to put permanent exclusions on specified conditions with customer consent. Apart from a list issued by the Irdai drafting panel, no other exclusions will be allowed in the health insurance policies. Diseases that are permanently excluded include Epilepsy, Heart Ailment Congenital heart disease and valvular heart disease, cerebrovascular disease etc.
Focusing on consumer experience, Irdai has now even allowed general insurers and standalone health insurers to collect premiums in instalments. Until now, these were collected on an annual basis. This is a great step towards health insurance inclusion for the masses.
Other than this, the regulator is also helping insurers by giving them flexibility in terms of premium payment modes, the sum insured options and premium increase or decrease option. It has allowed them to undertake minor modifications in approved individual insurance products on a certification basis without waiting for Irdai’s approval.
Some of these modifications include the addition of distribution channels, change in the base premium rates but not exceeding a change of (negative or positive) 15 percent of the annual premium rates, decrease in minimum premium and increase in maximum premiums, decrease in minimum age or increase in maximum age, among others.
Health insurance genuinely inclusive now
The regulator has standardised the wordings of exclusions, which are expected to be used verbatim. Irdai has standardised all exclusions in one place and with specific terms for every exclusion with relevant code. Each insurer is mandated to put the codes against each claim repudiation case. As a result, the policyholder will know from day one about the types of coverage he can avail.
It's a timely step from the regulator to rationalise the exclusions, which will ensure that the rights of the consumers are protected, especially in the case of those with PEDs, and they have provided enough scope for insurers to improve underwriting, as they rediscover pricing once such risks are accepted on the books.
Apart from this, Irdai has provided comfort to the customers by defining a moratorium period of 8 years after which nothing can be contested except a case of fraud and permanent exclusion, again fortifying that a customer will get the cover he needs when he needs it the most.
Irdai has continuously made sure that health insurance is transparent, in addition to ensuring that the product is available on a genuine price for lifelong. This is commendable for a country where access to quality healthcare still remains expensive and out of reach for a large section of society. Regulators have a tough job world over, to balance between consumer protection and yet not stifle innovation for the industry. Irdai deserves credit for coming out with flying colours on health insurance reforms, at least so far.
Yashish Dahiya is the Co-founder and CEO of PolicyBazaar.com
