BANKBAZAAR TIP CENTRAL
How is your EMI calculated?!
At a constant interest rate, EMI is constant month on month. The change happens in the way the principal and interest is added every month! In the initial years of loan repayment principal is lesser than the interest component of the EMI. In the latter years the reverse is true!
IRDA’s health insurance guidelines – a review
Insurance Regulatory and Development Authority (IRDA), the watchdog of insurance industry, has taken many policy initiatives in recent past which have potential to impact the insurers as well as insured.
Not only these guidelines help the policy holders but they will also improve the transparency of agreement between policy holders and insurance providers. Health insurance was in news for last couple of years for all the bad reasons. Doctors prescribing medicines and tests to earn extra income, third party administrators showing high-handedness and many times declining to pay for the hospitalization expenses, and insurance companies creating problem over cashless hospitalization and preferred hospitals are some of the issues faced by insurance industry.
In this article, we will discuss few of the changes that IRDA has proposed and how these changes will impact the insurance industry.
Guidelines on entry and exit age
Typically, as people age, their health needs go up. At the same time, they find taking health insurance too expensive because of the high premium charged by health insurance companies.The premiums are prohibitive and beyond reach of many retired people who do not have any source of income except pension. Moreover, there are always grey areas on the inclusion of diseases in the insurance. IRDA in its health insurance reform has made it mandatory for health insurers to provide insurance to people up to 65 years of age. This means if a customer is 64 years old and wants insurance, insurance providers cannot deny it. The company may provide exit age though. However, as long as policy holders renew health insurance on time, there will be no exit age. This can go for the whole life.
There are cases too where insurance providers have refused to renew insurance of the policy holder is sick. This will not be the case anymore as IRDA has taken it very seriously.
Guidelines on settlement and hospitalization
It has also asked all health insurance companies to settle the reimbursement within a month. This will be done by integrating their banking system with network of hospitals and the policy holders.
There was problem with settlement. Many times insurance companies change the preferred service providers and this created unnecessary confusion. IRDA has also taken note of this. It has said that cashless facilities must be provided in the hospitals where the patient is undergoing treatment even when it is not in the preferred list of service providers.
Moreover, there is general complaint from policy holders that many empanelled hospitals are far from cities and sometimes out of city. IRDA has further asked health insurance companies to choose hospitals which are across the country, especially the cashless ones which are primarily concentrated in metros. This information must be given to policy holders and also put on the website to keep policy holders informed about any possible changes.
Portability and multiple insurance
Portability is another contentious area for insurance companies and policy holders. There was much discussion on this and for a long time. The regulatory authority has mentioned this in the new guidelines. By this, policy holders will be able to choose another health insurance provider without losing any benefit.
At the same time, if a policy holder has multiple insurance, he or she can get the reimbursement settled by any one of them so that the policy holder doesn’t face any delay in treatment. Insurers can settle the bill among themselves later. This was not the case earlier when multiple insurance providers used to share the bill before reimbursement.
Guidelines on agreement and clauses
There has also been concern raised by policy holders on complex health insurance agreement. The agreements are often difficult to understand and bulky. In the draft, IRDA has directed insurance companies to provide this information on a single page so that policy holders understand what they are offered and make better decision.
At the same time, there must be written reason given by insurance provider if any claim is denied. This reason should be in a prescribed format issued by IRDA. Typically, once the claim is made, insurance companies increase the premium. IRDA has sought clarity on this too. The insurance providers have to provide clarity on “loading” as it is known in insurance parlance.
There will be provisions for alternative medicine or non-allopathic treatment in the insurance. This means people going for alternative medicine can claim insurance. For senior citizens, IRDA has proposed special provision for senior citizens.
These guidelines have far-reaching impact on the insurance industry in India. There will be further discussion on few of the guidelines which insurance providers have found difficult to implement. Despite few hiccups in implementation, IRDA, insurance providers, and policy holders will find these guidelines a win-win policy.