Checks on rise in health insurance renewal premium in the pipeline

Irda to develop 10 standard products for immediate use, may issue IPO guidelines

The Insurance Regulatory and Development Authority (Irda) on Wednesday said it would soon come up with norms to prevent arbitrary increases in renewal premiums on health policies. It added insurance companies often raised premiums when policies under which benefits were claimed were due for renewal.

“We have seen if a party makes a claim in a given year, it is likely the insurance company may increase the premium because you have made a claim. To some extent, it means they are doing underwriting at the time of the claim. And, that is not the way you do underwriting. That is what we are bringing in the draft regulations,” Irda Chairman J Hari Narayan said on Wednesday.

The norms would be part of the overall guidelines for the health insurance sector. It is expected the guidelines would clarify when an insurance company raises the premium, the move should be based on the behaviour of the entire segment, not on the experience of claims by an individual.

The norms may change the way insurance companies assess health risks. Now, these companies may have to carry out medical tests when a policy is given, not when there’s a claim.

Irda also plans to develop 10 standard products for immediate use by the industry. Earlier this week, Finance Minister P Chidambaram had said the insurance regulator would introduce a system of “use and file”, against the current practice of “file and use”. This would be aimed at allowing insurers to launch products without awaiting Irda’s approval.

“The insurance industry needs to stabilise; it has to mature in its approach, and I would say it is getting there. But there is still some distance to go. In that context, what we have agreed is the regulator and the insurance industry would jointly design about 10 products,” Hari Narayan said.

On allowing insurance companies to invest more than 10 per cent in debentures and equity, he said, “One of the recommendations in the amendment Bill, which is in the consideration of Parliament, is matters regarding the pattern should not be encased in the Bill, but regulated by the authority.”

Irda is likely to issue the final guidelines for initial public offerings for general insurance companies in two weeks. Hari Narayan said the insurance advisory committee had already considered the recommendations on these.