The Insurance Regulatory and Development Authority of India (Irdai) has put health insurers on a deadline to standardize exclusions, diseases or medical conditions that are not covered under a policy. According to an Irdai circular, issued on 27 September, insurers filing new products will have to comply with the guidelines—the draft was released in May 2019—with immediate effect. For existing products, Irdai has given insurers time till 1 October 2020. “Previously, there was no transparency about the claims that could be rejected. However, the regulator has now pre-defined all diseases against which claims can be rejected," said Indraneel Chatterjee, co-founder and principal officer, RenewBuy.com, a digital insurance company.

This may be good news for policyholders who overlooked exclusions or didn’t understand how they worked and got a shocker at the time of making a claim.

List of exclusions

The circular lists the exclusions that will no longer be allowed in health insurance policies (not including personal accident and travel covers). Diseases contracted after buying the policy (other than the conditions excluded for which standard wordings are prescribed by Irdai) cannot be excluded now. Injury or illness associated with hazardous activities will now be covered, but there will be exceptions. “This could be by way of an explanation to remove ambiguities. For example, if you work in an industry such as a high-rise construction site where there are inherent hazards, any injury or illness associated with such hazardous activities should be covered. However, if you choose to participate in hazardous sports activities such as bungee jumping, insurers can exclude injuries or illnesses arising out of such activities," said Subramanyam Brahmajosyula, head, underwriting and reinsurance, SBI General Insurance Co. Ltd.

Also, if one’s decision-making ability is severely impaired by usage of drugs prescribed by a medical practitioner, the policyholder will get a cover. However, insurers are seeking clarity on this. “The possibility of exploitation by policyholders cannot be ruled out. The key here is ‘prescribed by a medical practitioner’. We would, therefore, have to trust the judgment of the doctor," said Brahmajosyula.

Treatment for mental illness, stress or psychological and neurodegenerative disorders have also been brought under the purview of health insurance. But whether a policyholder would be covered with or without hospitalization for these conditions depends on the nature of the policy. “The guidelines say an insurer cannot discriminate an illness in being mental or physical. So if a policy covers physical illness only for hospitalization, then they’ll have to cover mental illness for hospitalization. Similarly, if the policy covers OPD expenses for physical illness then the same applies for mental illness too," said Amit Chhabra, head, health insurance, Policybazaar.com, an online insurance aggregator.

The same rule applies to other illnesses listed by the regulator.

Modern treatment methods such as oral chemotherapy, balloon sinuplasty, deep brain stimulation, among others, will now be included. These treatments shall be covered either as in-patient or as part of domiciliary hospitalization or as day-care treatment in a hospital. “There are no restrictions on the sum insured to be chosen by the policyholder. A lower sum insured can also be given such a treatment based on the sub-limits as levied by the insurer," added Chatterjee.

To encourage insurers to cover policyholders with pre-existing ailments whom they may not have otherwise covered, the new rules permanently exclude 16 pre-existing conditions, but only after taking the policyholder’s consent. Some of these conditions include malignant neoplasms, epilepsy, cerebrovascular disease, valvular heart ailments, chronic liver diseases, HIV and AIDS and Hepatitis B.

The regulations have also standardized the wording of exclusions, which are expected to be used verbatim. “This will enable product transparency between the insured and the insurer. Irdai has standardized all exclusions in one place and with specific terms for every exclusion with a relevant code. Each insurer is mandated to put the codes against each claim repudiation case. As a result, policyholder will know from day one about the types of coverage he can avail," said Chatterjee.

Irdai has also given specific definitions for excluding certain conditions such as obesity, cosmetic surgery, gender change treatments, birth control and infertility.

What it means

Removal of ambiguity in exclusions and inclusion of modern treatments will widen the scope of health insurance, but this is likely to have an impact on premiums. “Including modern treatments is a welcome step. However, the procedures have to be utilized for indicated conditions only. This inclusion would have pricing impact on the basis of the increment in the procedure expenses," said Rashmi Nandargi, head, retail health, personal accident and travel underwriting.

Brahmajosyula said insurers would have to undertake a major review of their policy wordings and pricing. “Some of the modifications would impact policy terms and conditions and claims," said Nandargi. Shweta Jain, certified financial planner, CEO and founder, Investography Pvt. Ltd welcomes the move, but added, “If the claims go up substantially, we could see a rise in costs as well."

Watch this space to know how the changes pan out.

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