In the draft guidelines on health insurance announced by Insurance Regulatory and Development Authority of India (Irda) in May, the definition of health insurance was widened. According to the draft norms, travel, personal accident and critical illness covers would fall under the health insurance segment.
“Health insurance business means the effecting of insurance contracts which provide for sickness benefits or medical, surgical or hospital expense benefits, travel health insurance and personal accident cover,” said the guidelines issued by Irda. Presently, personal accident and critical illness covers come under miscellaneous business.
This may require the finance ministry to alter the definition of health insurance under the Health Insurance Act, as it does not include travel, personal accident and critical illness under health insurance. “The hitch: Major health insurance norms like portability and lifetime guaranteed renewability may be applicable to these covers also, which may be very difficult for travel insurance as it is a short-term cover with a maximum policy term of six months,” says a health insurance head of a general insurance company.
While personal accident and critical illness covers insure health-related expenditures, an international travel cover is largely health insurance as it is a mix of medical and travel-related covers. For example, consider a $5 lakh cover with Tata AIG’s Travel Guard that insures you for accident and sickness medical expense reimbursement. This comprises accidental death and dismemberment (common carrier) for $5,000, accidental death and dismemberment for $25,000 (24 hours), sickness dental relief ($500) along with emergency medical evaluation. Here travel or baggage related covers (baggage, passport, trip delay) are covered for maximum $1,000.
Also, the insurance regulator wants “travel medical policies may be offered either as a stand-alone product or as an add-on cover to existing health policy as and when an existing policyholder travels.” Presently, travel covers are only stand-alone covers. Personal accident and critical illness indemnity covers are also available only as stand-alone covers, while benefit covers (issued by life insurers) can be bought as an add-on on term plans.
At the same time, the regulator has disallowed assigning policies to anyone else. “No assignment of health insurance policies shall be allowed irrespective of whether they are indemnity or benefit based,” said the draft guidelines. This means you may not be able link any of the general insurance policies to loan.
Many general insurers allow linking personal accident or critical illness cover under the credit shield business, that is link it to home loan. Here, in case of you lose your income (due to accident and disability or any terminal disease) the policy proceed takes care of the loan repayment.
“The regulator is discouraging the credit shield business as these covers are short-term ones and may lead to huge payouts for insurance companies,” said another health insurance head.