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What the doctor ordered

Draft health insurance guidelines must not remain on paper

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The insurance regulator’s draft guidelines on health insurance were necessary, given the segment has been plagued with high loss ratios, low penetration and persistent customer complaints. The draft, which proposes changes in every facet – product structure, renewability and claims settlement – is a thoroughly pro-customer document and seeks to plug the various loopholes that have been used to make life difficult for policyholders, resulting in extremely low penetration. Although the Indian healthcare industry is worth Rs 3.30 lakh crore, the health insurance industry is only Rs 17,000 crore of that. One of the most important recommendations is setting an entry limit for health insurance policies at 65 years and doing away with the exit age, which basically means that insurers will have to renew policies without a break. It’s a well-known fact that insurers have been denying insurance to people above 55 years due to higher underwriting risks. To make the process more transparent, the draft guidelines also recommend that insurance companies have to submit, in writing, reasons for denying any proposal. Other sensible proposals include the settlement of claims within a month and allowing consumers to have multiple policies. Similarly, the “preferred network of hospitals” clause will be removed, which means policyholders can go to any hospital at the time of need, and won’t have to pore over a booklet to find out which hospital has an agreement with their insurer. Most importantly, the guidelines lay down standard, regulator-mandated settlement practices.

While the regulator has done its bit towards enhancing transparency and accountability, there are still some loose ends that need to be tightened. Firstly, though the entry age has been set at 65 years, insurers can easily price out the buyers by charging exorbitant premiums, which would defeat the purpose. Some already have provisions for lifelong renewals and allow customers over 60 years, but the premiums charged are so high that only a very few can actually afford it. According to insurance officials, since the underwriting risk is higher, the pricing for a Rs 5 lakh policy (for people over 70 years) is expected to be in the region of Rs 60,000-80,000. Besides, insurance companies could exclude some chronic diseases from the cover.

Another area where the regulation might remain on paper is in claim settlement practices. Historically, health insurance in this country has been a loss-making proposition, and claims ratios are anywhere between 100 per cent and 140 per cent. This means that against a premium collection of Rs 100, the industry pays claims of Rs 100-140. Insurers, thus, try to decline claims. Though the regulator has mandated that claims should be settled within 30 days, there is no guarantee that things will improve dramatically anytime soon. Consumer courts are full of cases in which claims have been either denied or delayed by a very long time. Overall, however, the regulator has sought to do a fine job. Its intervention was needed in a sector still unable to serve the cause of expanding affordable healthcare.

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