The health insurance market has a wide variety of significantly different health insurance products available today, often leading prospective customers to choose from a large number of products embedded with varying benefits and exclusions with limited options to choose only those covers are actually needed by such a customer. Due to the lack of standard medical solutions in the insurance industry, it was considered necessary by the IRDAI that potential customers have access to a basic health insurance product in order to avail coverage under a health insurance policy based on their requirements. In order to enable prospective customers to avail a basic and standardised health insurance product, the IRDAI recently issued the "Draft Guidelines on Standardization of Individual Health Product" of 19th February 2019 ("Draft Guidelines").
The Draft Guidelines propose a standard individual health insurance product offering a fixed set of covers to customers and termed as a 'Standard Mediclaim Policy' ("Mediclaim Policy"). Every General and Health Insurer will be mandatorily required to offer the Mediclaim Policy, in accordance with the directions issued by the IRDAI in this regard.
The Draft Guidelines propose the following specifications for the Mediclaim Policy:
- Construct of the Mediclaim
Policy: The terms and conditions of the Mediclaim Policy
are proposed to be divided into the following parts:
- Part I: Policy Schedule - The Policy Schedule shall set out the specific terms of the insurance cover available to the Insured and specify the Sum Insured limits for the covers offered under the Mediclaim Policy;
- Part II: Definitions - The definitions applicable to the Mediclaim Policy shall be incorporated in this part. Further, wherever applicable, the definitions shall be in compliance with the standard definitions stipulated under the "Guidelines on Standardization in Health Insurance" of 29th July 2016;
- Part III: Benefit Design - The Mediclaim Policy shall be clear and specific in setting out the base benefits available under the Mediclaim Policy and the applicable terms and conditions;
- Part IV: Exclusions – The exclusions applicable to the cover under Mediclaim Policy shall be subject to the guidance issued by IRDAI from time to time in this regard; and
- Part V: Other terms and conditions - All other applicable terms and conditions shall be incorporated in this part.
- Base Covers: The
Mediclaim Policy shall mandatorily cover the following "Base
Covers" invariably subject to sub-limits, if any, and no
additional add-ons, deductibles, optional covers or variants shall
be offered with the Mediclaim Policy:
- Hospitalization Expenses: Expenses incurred on, including but not limited to room rent, nursing expenses, cataract, plastic surgery, domiciliary hospitalization;
- AYUSH Treatment: Expenses incurred on treatment under Ayurveda, Unani, Sidha and Homeopathy system of medicines;
- Pre-Hospitalization: Expenses incurred for a period not less than 30 days prior to the date of hospitalization;
- Post Hospitalization: Expenses incurred for a period not less than 60 days from the date of discharge towards consultant fees, diagnostic charges and medicines and drugs;
- Wellness Incentives: Insurers shall provide access to health consultations for obtaining periodic consultations at least once in a policy year, access to professional medical services, including follow up care, parametric indices and reward mechanisms to incentivize policyholders, and outpatient consultations or treatments to policyholders.
- Family Floater Policy: The Mediclaim Policy shall be offered on family floater basis as well.
- Category of Cover: The Mediclaim Policy shall be offered as a standalone product only on indemnity basis, and shall not be combined with any critical illness covers or benefit based covers available.
- Pricing: Insurers are allowed to formulate differential pricing mechanism in order to incentivize early entry of prospective policyholders, continued renewals and favourable claims experience.
- Distribution Channel: The Mediclaim Policy may be offered across all distribution channels including, through micro insurance agents, point of sales persons and common service centres.
- Micro Insurance Product: The Mediclaim Policy may be offered as a micro insurance product subject to the sum insured limits specified in the IRDAI (Micro Insurance) Regulations 2015, and other applicable circulars and guidelines issued by the IRDAI in this regard.
- Basic Sum Insured: The minimum sum insured under the Mediclaim Policy shall be Rs.50,000, and policyholders may insure up to a maximum limit of Rs.1,000,000.
- Cumulative Bonus: The sum insured shall be increased by 5% per policy year, up to 50% of the Sum Insured provided that no claims have been made under the policy period, and that the Mediclaim Policy is continuously renewed without any break.
- Co-payment: The IRDAI has currently mandated 5% of co-pay to form a part of the Mediclaim Policy feature, whereby the policyholder will be liable to pay 5% of the total claim amount.
- Entry Age: The minimum age for entry of the principal insured shall be 18 years and the maximum age for entry shall be 65 years, along with lifelong renewability. In case of a dependent child, the Mediclaim Policy shall cover from 0 days to 25 years. However, the policy shall have no maximum exit age.
- File & Use Application: The File & Use application (Form – IRDAI – FnU – HIP) shall clearly disclose the benefit pay out structure, the co-pay terms, non-medical limit and all other relevant details in the application.
- Nomenclature: The name of the Mediclaim Policy shall be succeeded by the name of the Insurer issuing it, and no other name is permitted to be used on the relevant policy documents.
In addition, the underwriting of the Mediclaim Policy, and the applicable terms and conditions such as the free look period, policy period, modes of premium payment, grace period, renewal, premium loading and discounts and portability shall be in compliance with provisions of the IRDAI (Health Insurance) Regulations 2016, "Guidelines on Standardization in Health Insurance" of 29th July 2016 and the "Guidelines on Product Filing in Health Insurance Business" 29th July 2016, as amended from time to time.
The Draft Guidelines appear to be aimed at regulating and promoting the orderly growth of the health insurance market in India and furthering the interests of the policyholders. While the Draft Guidelines stipulate the standard covers to be offered under the Mediclaim Policy, the specific extent of coverage, sub-limits, and other modalities under these base covers have not been expressly stipulated and offer Insurers certain flexibility to that extent.
The IRDAI has also allowed Insurers to determine the pricing of the product in accordance with its own underwriting experience and standards which appears to have been largely welcomed by Insurers. Further, the Indian insurance industry has also hailed the induction of such a standardised product, due to which the porting process of the Mediclaim Policy is expected to become fairly easy and smooth.
The IRDAI has invited comments and suggestions on the Draft Guidelines from all stakeholders. It remains to be seen how the Mediclaim Policy will be priced by General and Health Insurers, and how the product will be received by customers and implemented going forward.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.