On September 4, 2020, the Insurance Regulatory and Development Authority of India (“IRDAI”) notified its ‘Guidelines on Wellness and Preventive Features' (“Guidelines”), overhauling existing norms on wellness promotion by insurers. The Guidelines replace the earlier framework regulating wellness initiatives of insurers, under Chapter VII of the IRDAI's Consolidated Guidelines on Product Filing in Health Insurance Business (“Product Filing Guidelines”) of July 22, 2020.
Traditionally, Indian insurance laws have strictly prohibited the offering of inducements to prospects for purchasing insurance (under Section 41 of the Insurance Act, 1938). Nevertheless, over the years, the IRDAI has encouraged wellness and preventive elements as part of health product design, in recognition of the fact that improved wellness enables affordable health insurance and ultimately benefits policyholders. In this context, the Guidelines introduce increased flexibility for partnerships between insurers and third parties towards holistic health insurance cum wellness offerings for the insureds.
Implications of the Key Changes
In this article, we analyse salient features of the new norms on wellness offerings and their implications:
- Manner of Offering Features: While the Product Filing Guidelines were silent on the manner in which insurers may incentivise policyholders through wellness features, the Guidelines expressly state that insurers may offer reward points to policyholders who comply with set criteria, as part of promoting their wellness and preventive regime. The mechanism of ‘reward points' has, hitherto, been used to incentivize customers in many service offerings and is slated to increasingly fuel health insurance products.
- Additional Recognized Services: Along with health specific services offered by network provider hospitals, the Guidelines now recognize that insurers may promote wellness by arranging redeemable vouchers for membership in yoga centres, gymnasiums, sports clubs or fitness centres, as well as vouchers for health supplements. As the Product Filing Guidelines previously rejected consumable health boosters such as protein supplements (as part of insurer's wellness offerings) the shift in this regulatory stance is notable.
- Disclosures in File &Use: The earlier regime required that no wellness and preventive feature should be offered without it being filed or incorporated as part of the product in terms of the Product Filing Guidelines. The Guidelines take this further by requiring insurers to also file the detailed methodology/ criteria on how policyholders will accumulate reward points associated with wellness and preventive features. Undoubtedly, wellness features will need to be designed with a long term perspective, as modifications may attract filings/ approval requirements with the IRDAI.
- Optionality of Wellness Offerings: The IRDAI has expressly clarified that wellness features can be offered on an optional basis to customers or as an add-on benefit. The optionality of wellness features will benefit both insurers who can now bundle wellness offerings with traditional insurance products and customers, who have the choice to also seek plain vanilla health insurance products. Subject to the IRDAI's approval, a single wellness add-on can now be attached across different product offerings of insurers. Policyholders may soon begin aligning themselves with a particular wellness package, which could be attached to any health insurance product chosen by them. The IRDAI has also allowed insurers to modify their existing products for attaching wellness features, after complying with norms prescribed under the Product Filing Guidelines.
- Choice of Policyholders: The Guidelines reveal a regulatory expectation that wellness features, rewards or services of third parties should not be forced upon customers and interfere with their freedom of choice. In cases where more than one reward is offered, the IRDAI has mandated that the choice would lie with the policyholder to choose the appropriate reward as per his / her requirement. Further, where multiple service providers are engaged by insurers, policyholders are to be allowed to choose their preferred service provider for availing the wellness benefit.
- Restrictions on Use of Third Party Branding and Payments: Insurers have now been expressly restricted from publishing trade names / logos of third party merchandize in insurance advertisements. Nevertheless, they are permitted to refer to these services in generic terms, and disclose details on their websites (with appropriate references or links incorporated in advertisements or policy wordings). The promotion of third party products by insurers, however, continues to be prohibited. Insurers are also prohibited from making / receiving any payments to / from third parties towards wellness features, except payments to them for the monetized value of reward points redeemed by policyholders.
Some Hits & Misses
The IRDAI's decision to allow insurers to pay to third party wellness providers the monetized value of reward points can significantly change the way insurers collaborate with third parties. This could also enable a wholesome health insurance-cum-well-being experience for customers, where meeting workout goals and fitness criteria would unlock not only premium discounts, but also enable them to enjoy gym memberships/ yoga sessions and other well-being services funded by the insurer. Indeed, such collaborations are likely to make health insurance products more attractive to customers, particularly to the younger generations of policyholders.
Noticeably, the list of wellness features (as allowed to be facilitated by insurers under the Guidelines) focusses solely on physical wellness. The Mental Healthcare Act, 2017 requires every insurer to provide medical insurance for treatment of mental illness on the same basis as is available for physical illness. The Product Filing Guidelines read with the IRDAI's Master Circular on Standardization of Health Insurance Products dated July 22, 2020 take this objective forward, by requiring that no health insurance policy shall incorporate exclusions on treatment of mental illness, stress or psychological disorders and neurodegenerative disorders. Under this regulatory backdrop and in view of increasing awareness of mental health issues in the country, the addition of services promoting mental wellness, such as offering of discounts on therapy or counselling sessions with psychologists or issuance of redeemable vouchers for meditation sessions, etc. would have been well received.
While the Guidelines stipulate that insurers cannot accept any liability towards the quality of wellness services, insurers are mandated to ‘monitor the quality of service offered by service providers'. An additional compliance burden has been placed on insurers, which may turn out to be expensive and impractical to implement. Any guidance by the regulator on the extent of such monitoring by insurers will be helpful, as the health insurance and fitness industry partner more closely.
Globally, collaboration between insurers and wellness providers is on the rise, with start-ups cropping up to focus on improving synergies among these services providers and bringing more value to customers. Digital innovation in health insurance and allied sectors has been accelerated due to the onset of the pandemic, wherein amongst other things, health check-ups and consultations have taken on a virtual avatar. In light of this, a question arises as to whether the Guidelines allow insurers to facilitate wellness features, which are offered to users through telephonic, video or other virtual modes. Further, while the Guidelines adequately cover wellness offerings of insurers, they are silent on the role that may be played by insurance intermediaries (particularly, insurance brokers) in facilitating wellness services for their long standing individual and corporate clients, alongside intermediation of health insurance.
All in all, the issuance of the Guidelines is a laudable move by the IRDAI. The timing of these guidelines is appropriate, in light of the coronavirus pandemic, which has made policyholders health conscious and more careful about their wellness. The new norms appear to be in sync with current fitness and wellness aspirations of Indian policyholders. It will no doubt be interesting to witness innovations catalysed as a result of flexibility introduced by the novel framework.
Originally Published by Shardul Amarchand Mangaldas & Co, November 2020
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