BackPolicy standardization not responsible for steep hike in renewal premiums: IRDAI
The clarification comes primarily in the wake of policyholders blaming regulatory changes for the rise in premiums in this financial year.
PremiumThe Insurance Regulatory and Development Authority of India (Irdai) has clarified that it has permitted general and health insurers to change the base premium by up to +/-5% of originally approved premium rates in order to comply with the guidelines on standardization of exclusions.
Irdai had last year broadened the scope of coverage to include conditions such as mental illnesses and HIV-AIDS. The regulator has also been standardizing the products and has reduced the list of non-payable items also called exclusions such as chemotherapy and robotics treatment, among others. Items under exclusions are not reimbursed by the insurer.
The permission to increase premium was done as a one-time measure for seamless transition of existing products to ensure viability and sustainability. “As on 30 September 2020, out of 388 products, premiums were increased by general and health insurers up to 5% of the then prevailing rates only in case of 55 products," Irdai said in a circular on Thursday.
The clarification comes primarily in the wake of policyholders blaming regulatory changes for the rise in premiums in this financial year.
Moreover, the regulator said it had cleared revision in premium beyond 5% of only five health insurance products of general or health insurers during the year up to 30 November as part of periodical modification of their respective products, based on the incurred claims experience.
“There was earlier speculation that health insurance premiums will go up due to standardization of exclusions. The standardization now does not allow insurance companies to reject claim for chemotherapy or robotics treatments, among others. Many people concluded that the regulatory change will lead to premium hike. This notification clarifies that it did not have a huge impact on premium pricing," said Abhishek Bondia, managing director and principal officer, SecureNow.in, an insurance broker.
According to Amit Chhabra, health, business head, Policybazaar.com, an online marketplace for insurance, policyholders might have confused the hike due to the age factor with the regulatory changes. “Prices have always risen with the age of the policyholder. Prices of health insurance policies always rise with age as it increases the cost of medical treatments costs," he said.
Customers of some banks selling insurance products have also seen steep premium hikes in the recent past. “A lot of banks who used to sell group policy to their customers have also increased prices. Some banks have merged with other lenders, which led to customers migrating to other insurance companies," Chhabra added.
According to experts, the regulatory compliance is lesser in group products, which makes it easier for companies to raise prices.
Irdai’s regulations stipulates that insurers can price their health insurance products based on age, risk factors and family members covered under a policy.
“The regulator will only allow price hike, if a health insurance product is grossly underpriced or the company is making losses, which is again the result of the product being underpriced," said Chhabra.
Note that renewal premium usually increases with the change in the age bracket, and the price hike is quite steep, especially in the higher age groups.
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