New Delhi: India’s insurance regulator will roll out new health insurance guidelines in the next two months, throwing light on a spate of tricky and important issues including pre-existing diseases, misselling to the public, portability of policies and solvency requirements that have stunted the growth of the health insurance sector.
While the sector is estimated by Ernst & Young to grow to $3.8 billion (Rs17,100 crore) by 2012 from $711 million (Rs3,199 crore) in 2006, less than 1% of India’s population is currently covered. Meanwhile, the business continues to lose money for insurers.
Through these new guidelines, the Insurance Regulatory and Development Authority (IRDA) wants to address issues regarding promoting health insurance and its commercial viability. “We are in the process of laying down guidelines clarifying issues of portability, pre-existing diseases, critical illnesses and solvency norms. The draft guidelines should be ready by middle of this year,” said C.S.Rao, the chairman of the regulatory authority who has been consulting with insurers and third-party administrators as well as studying international practices ahead of issuing the norms.
“Assuming all insurance products are similar, portability of policies will ensure consumers can switch from one insurer to another depending on their service quality and network,” said Shaswat Sharma, associate director of management consultant KPMG. “If pre-existing diseases were to be included in the insurance contract, then insurers should conduct medical tests on their own, specifying clearly what is covered and what’s not.”
The guidelines will also address the special needs of certain segments like senior citizens, said Rao. Population segments like these are notoriously “eased out of insurance cover through non-renewable of policies or clauses such as pre-existing diseases”, said another IRDA official. The guidelines initially are expected to “barely touch upon” policies for long-term care and disability incomes arising out of illnesses as “these will require extensive actuarial studies”, explained the official.
While life and non-life companies have solvency margins of 150%, health insurance companies will have risk- based capital adequacy norms and differentiated investment regulations and disclosure norms.
A chronic nagging problem with health insurance has been claim ratios that run as high as 120-125%. They make the business unprofitable, thereby compelling insurers to either ignore this segment or indulge in “overselling” and “misselling.” This has resulted in the maximum number of complaints, in the non-life segment, coming from health insurance.
The norms will make sure that “people who were promised medical reimbursements on certain accounts, are not turned away later citing the fine print”, said the official.
The guidelines have assumed added significance as the health insurance sector continues to attract a bevy of local and international players. While Apollo Hospitals and German insurer DKV are set to be the second stand- alone health insurers in the country (Star Health & Allied Insurance being the first) international majors such as US-based Aetna Inc., Cigna Healthcare and British player Bupa Healthcare have also evinced interest. Indian corporate hospital chains such as Fortis and Max Healthcare are also sitting on the fence, waiting for regulatory issues to clear up.
Lifestyle-related chronic diseases have also put the focus on health insurance. According to a Crisil Research study, at least 83 million people suffered from heart ailments, cancer and diabetes in 2006, accounting for 13% of the hospitalised cases. By 2016, this percentage could touch 20%.