With a continually increasing market size and growth of almost 20% every year, health insurance products have seen an improved uptake in recent times. This growth is largely attributable to government initiatives and health insurance schemes launched across India as well as general increased awareness and ease of purchase amongst the more savvy urban population.
While various health insurance offerings overseas provide access to a range of wellness benefits such as free/discounted fitness classes, gym memberships, spa and other alternate therapies, weight-loss consultations and membership to smoking cessation programs, offerings in India in this space have traditionally been restricted to personal accident and hospitalization covers.
The arguments in favour of including wellness and preventive benefits in insurance policies include that they would aim to improve the individual policyholder's health as well as the Insurer's own portfolio by significantly bringing down the claims ratio. In recent times, preventive measures are widely believed to provide value to the insurance industry as it helps policyholders avoid unnecessary treatment and hospitalization which in turn bring down the Insurer's costs.
The IRDAI (Health Insurance) Regulations 2016 ("Health Regulations") first recognised and permitted General Insurers and Health Insurers to devise incentives and mechanisms to reward policyholders for continued renewals, favourable claims experience, and preventive habits. The Health Regulations encouraged wellness and preventive elements as a part of product design, but also simultaneously imposed requirements on Insurers to disclose such incentives and mechanisms upfront in the prospectus and policy document in accordance with the applicable product filing procedure, and factor the costs of such services into the pricing of the health insurance product.
The IRDAI's "Guidelines on Product Filing in Health Insurance Business" of 29 July 2016 ("Product Filing Guidelines") expand on the norms specified in the Health Insurance Regulations. Chapter VII of the Product Filing Guidelines, titled "Guidelines on Wellness Features/Benefits", presently provides the specific framework to be followed by all Insurers for offering wellness features/benefits as a part of their health insurance policies.
The Product Filing Guidelines permit Insurers to design wellness features with the objective of promoting the improvement and maintenance of good health and require the benefits under these features to be accrued at a pre-declared rate/amount which is declared upfront to policyholders (and not linked to a dynamic factor such as an interest rate). Further, Insurers are required to specify the manner of redeeming the benefits under each wellness feature in the policy wordings and prospectus relating to such insurance product, and also disclose updated information on their website. Any errors or omissions in calculation of the accrued benefit is to be addressed through the Insurer's in-house grievance redressal procedure.
In 2017, in the context of insurance technology or 'Insurtech', the IRDAI also expressly recognised the role of 'wellness' oriented consumer technology in an Insurer's risk assessment and product design.
By way of its Circular of 7 December 2017, the IRDAI set up a working group to examine innovations in insurance involving wearable devices to measure personal fitness and incorporating a healthy lifestyle, stating that "...it is important to understand technology trends and their various implications for insurance even while seeking to harness the potential and advantages... While encouraging innovation, the regulator must run alongside it, keeping in view the interests of policyholders."
The recently notified IRDAI (Health Insurance) (Amendment) Regulations 2019 ("Amendment Regulations"), published on 21 November 2019, brought certain amendments to the provisions of the Health Regulations.
In relation to the nature of the wellness features, R19 of the Health Regulations permitted Insurers to provide certain health specific services such as wellness benefits, in addition to the discounts offered by Insurers themselves on premiums. However, R19 of the Health Regulations expressly prohibited Insurers from promoting or offering (or offering any discounts on) products and services of third parties which are not their "Network Providers"1.
Particularly, R19(i) specified the forms of health specific services (including discounts of such services) that could be offered by such Network Providers, namely:
- Outpatient consultations or treatments, or
- Pharmaceuticals, or
- Health check-ups.
One of the key amendments introduced under the Amendment Regulations has been to the existing norms on wellness benefits under health insurance policies. In this regard, R19 "Wellness and Preventive aspects" of the Health Regulations has now been entirely replaced with the following:
"Insurers may endeavour promoting wellness amongst policyholders of health insurance as per the guidelines as may be specified by the Authority from time to time"
Due to the recently notified amendment, for the time being, there is certain uncertainty in the position of third party products and services offered by Insurers under the wellness features of their products, until issuance of a final guidance by the IRDAI in this regard.
Exposure Draft on Wellness
The IRDAI has issued "Draft Guidelines on Wellness and Preventive Features/Benefits" of 7 November 2019 ("Exposure Draft"), which are proposed to supersede the present norms specified under Chapter VII of the Product Filing Guidelines on wellness and preventive benefits.
The Exposure Draft, as presently issued by the IRDAI, proposes to consolidate the provisions identifying wellness and preventive benefits under the Health Insurance Regulations and the Product Filing Guidelines into one set of applicable guidance, and "enhance the scope of services offered under wellness and preventive features/benefits of health insurance products" while ensuring that an informed choice is made available to policyholders.
Some of the salient amendments proposed under the Exposure Draft are as follows:
- The erstwhile R19 "Wellness and Preventive aspects" under the Health Regulations specified that "no discount shall be offered on any third party service or merchandise" and the regulatory framework only permitted an Insurer to offer (i) discounts on the insurance premium charged by it, or (ii) discounts/benefits on specific health services (such as diagnostics, consultations and pharmaceuticals) offered by its empanelled Network Providers only. However, in a significant change, the foregoing R19 now stands deleted by the Amendment Regulations. The Exposure Draft appears to relax the earlier restriction on only using Network Providers, by including the words "or other empanelled hospitals / service providers", which may potentially mean the inclusion of broader forms of wellness incentives. Further, in addition to the discounts on the insurance premium, Insurers are expressly permitted to provide an increase in sum insured at the time of renewal, as a part of their wellness feature, provided that such increase is independent of any cumulative bonus offered under the insurance product.
- In continuation of the foregoing, while the Health Regulations earlier specified that "no policy of insurance shall promote or offer the products and services of third parties who are not Network Providers", products and services offered by a third party are expressly recognized under the Exposure Draft. In this regard, the Exposure Draft merely states that "insurers shall not promote products or services of any particular third party service provider".
- While the Insurer still remains responsible for any errors or omission in 'calculation' of accrued benefits under its wellness feature, the Insurer is expressly required to state that it shall not be liable for any 'defects or deficiencies' on the part of any service provider. Insurers are also responsible for ensuring that the service providers have appropriate mechanisms in place to discharge their obligations under the wellness programme(s).
- Another significant change is in relation to consumables offered under wellness features. While the Product Filing Guidelines presently state that "use of protein supplements and other such consumable health boosters shall not be considered to be part of a wellness feature", the Exposure Draft expressly permits Insurers to offer "redeemable vouchers" to obtain protein supplements and other consumable health boosters / supplements;
- Under the Exposure Draft, Insurers are also prohibited from receiving any consideration for offering such third party's products/services. Likewise, no payments may be made by Insurers to third party service providers, with the exception of the "monetized value of the rewards points" which are redeemed by its policyholders. All third party merchant-wise and product-wise payments are required to be disclosed in the Insurer's annual public disclosures.
- In relation to advertising the wellness feature, the Product Filing Guidelines presently require Insurers to ensure that the insurance benefit offered under the product is highlighted, and that "the wellness features do not predominate". However, the Exposure Draft sets out a comprehensive set of norms to be followed for advertising products with wellness features, requiring Insurers to also disclose the corresponding "price factor" wherever wellness features of a product are advertised, and similarly disclose in all advertisements the manner of accrual and redemption of the wellness benefits for each member in a floater policy.
- Further, Insurers are prohibited from promoting the products or services of any particular third party service provider, and may not publish their trade names/logos in any of their insurance advertisements.
The foregoing set of changes proposed under the Exposure Draft significantly broaden the scope of wellness and preventive features that are presently permitted to be offered by General and Health Insurers in India. However, in relation to the scope of wellness features that are offered by Insurers, we note that standard mediclaim policy proposed under the IRDAI's "Draft Guidelines on Standardization of Individual Health Product" of 19 February 2019 ("Draft Mediclaim Guidelines") shall also be of significant relevance, as discussed below.
Standard Mediclaim Product
Due to the lack of standard health insurance products in the insurance industry, and in order to curb confusion in the minds of prospective customers, the IRDAI recently proposed the introduction of a basic and standardised individual mediclaim policy offering a fixed set of covers to customers. The Draft Mediclaim Guidelines set out the specifications for the proposed mediclaim policy, including the basic set of covers to be offered by each Insurer. It is relevant to note that ¶15 of the Draft Mediclaim Guidelines proposes to offer wellness incentives as a basic cover available to all policyholders, stating:
"...it is considered essential that a wellness and preventive program that incentivises the targeted market segment to start living healthier shall also be incorporated. Accordingly, to enable the individuals to lead longer, healthier and more productive lives, the following wellness features shall be made available to all the insured persons..."
In this regard, the IRDAI's standardised mediclaim policy proposes to provide policyholders with access to a host of wellness incentives, namely:
- Free Check-up: Periodic consultations and health check-ups with network providers, at least annually.
- Disease management: Follow up care and allied services for overall disease management of the policyholder post hospitalization.
- Fitness Activities: A reward mechanism to incentivize the policyholder to follow a fitness regime.
- OPD: Periodic or certain trigger-based outpatient consultations and treatments of the policyholder.
While the Draft Mediclaim Guidelines are still under deliberation, they are of importance since every General and Health Insurer will mandatorily be required to offer the standardised mediclaim policy and the wellness benefits offered thereunder, and in our view, the same may invariably set the base for other wellness offerings in the Indian insurance market.
This year, there appears to be a significant focus on rewarding policyholders on the basis of preventive and wellness habits, with a specific focus on forthright disclosures made in the policy document and all advertising material.
The Exposure Draft lays down detailed guidelines on wellness and preventive features/benefits, and proposes to expand the scope of services that are presently generally offered under health insurance products. While it is still to be seen how the gamut of wellness features presently offered by Insurers under their products adapt according to the relaxations proposed to the regulatory framework, it is also relevant to note that the IRDAI still has power to review the market practices, the right to reject wellness features proposed by the Insurer if they are believed to be against policyholders' interests or not in line with fair market conduct. The Exposure Draft is presently in the draft stage with comments from various stakeholders having been submitted.
With the changes already introduced under the Amendment Regulations, and the expected issuance of the Draft Mediclaim Guidelines, it appears that it will not be long before a more comprehensive wellness regime is introduced in the Indian insurance market.
1 R2(k) of the IRDAI (Third Party Administrators – Health Services) Regulations 2016 defined a network provider in the following terms:
"Network Provider" means hospital or health care provider enlisted by an insurer, TPA or jointly by an insurer and TPA to provide medical services to an insured either on payment or by a cashless facility.
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