Irda Chairman J Hari Narayan on new health insurance guidelines, portability and more
J Hari Narayan, chairman, Insurance Regulatory and Development Authority, talks about the new health insurance guidelines and portability in an interview to Money Today.
Irda Chairman J Hari Narayan
J Hari Narayan, chairman of Insurance Regulatory and Development Authority (Irda), talks about the new health insurance guidelines and portability in an e-mail interview with Money Today.
Q. How has been the initial response of insurer companies to the exposure draft on Health Insurance Regulations, 2012?
A. The draft of Health Insurance Regulations 2012 was uploaded on the website on 30 May 2012 for views from public and stakeholders. The initial response received from the public/some stakeholders is positive and welcoming. We are yet to receive views from insurance companies.
Q. The draft guidelines tell insurers to give a written explanation for rejection of application for purchase and renewal of health insurance as also of claims. But what happens if there is a dispute on the reasons for denial?
A. Acceptance or rejection of risk has to be as per the board-approved underwriting policy irrespective of whether the proposal is fresh or for renewal. As long as the acceptance and rejection is as per such underwriting policy, the insurer can't be forced to accept any risk which otherwise could have been rejected based on such policy.
Q. Has portability brought some substantial change in the health insurance industry in terms of competition and customer retention?
A. The purpose of portability is to provide a mechanism or a system which enables the policyholder to shift the policy from one insurer to another in case of dissatisfaction with respect to the existing policy or the services or to switch over to an innovative/another product which could be available elsewhere. In the current quarter, so far, 1,061 policies have been ported and 31 cases have been rejected. There are about 81 requests which are under process.
Q. When porting a policy, the customer loses out on cumulative bonus. Even the underwriting process is changed (as a result higher premium may be charged for a similar cover). Terms and conditions, inclusions and exclusions can also change. Does this mean that, apart from accrued continuity benefits, there is not much that can be ported?
A. In case of porting, the customer will not lose credit for previous policy years which have been spent with the previous insurer. In the absence of portability, the policyholder, if he takes a fresh policy, will have exclusions for pre-existing diseases and others afresh up to four years. However, with portability, this is protected and enables the policyholder to move freely from one insurer to another. Apart from that, the cumulative bonus can be protected by charging a premium.
Q. Do you think standardisation of health products can help in bringing full portability?
A. Standardisation will render the whole question of portability redundant, as is the case in a standardised RSBY coverage which can be availed in any part of India. But on the other hand, standardisation will deny society the benefits of innovation in product design, which is a desirable feature.
Q. IRDA has asked the health ministry to come out with standard protocols for treatments. How will this benefit the industry and by when can we expect this to be implemented?
A. Standardisation of protocols will help in improving the quality of healthcare. The second benefit will be on pricing, which will be subject to greater competitive scrutiny.
Q. Some experts are saying that the draft guidelines, if implemented, could lead to a rise in premium rates. Is that correct?
A. The draft guidelines in itself do not create any cost push. Most of the elements in the draft guidelines are part of the existing set of regulations, circulars, etc. On the other hand, it will lead to more transparency, which will be a great benefit to policyholders.
Q. One of the complaints of standalone health insurers is that they are unable to utilise the bancassurance channel as the current regulations allow banks to partner with only one general and one life insurance company. Since other general insurers have additional verticals (such as motor and home) and, thereby, have a bigger product bouquet, banks are more interested in partnering with them. Do you think this is hindering the growth of standalone health insurers?
A. For years 2009-10 and 2010-11, the rate of growth of standalone health insurers was much higher than the growth of other general insurers. However, in 2011-12, the growth of standalone health insurers is lower than that of general insurers as a class. We are still in the process of analysing the reasons for such a development. I am not persuaded that the lack of bancassurance channel is the sole or even the principal cause as the proportion of products sold through bancassurance is low compared to total sales.
Q. How has been the initial response of insurer companies to the exposure draft on Health Insurance Regulations, 2012?
A. The draft of Health Insurance Regulations 2012 was uploaded on the website on 30 May 2012 for views from public and stakeholders. The initial response received from the public/some stakeholders is positive and welcoming. We are yet to receive views from insurance companies.
Q. The draft guidelines tell insurers to give a written explanation for rejection of application for purchase and renewal of health insurance as also of claims. But what happens if there is a dispute on the reasons for denial?
A. Acceptance or rejection of risk has to be as per the board-approved underwriting policy irrespective of whether the proposal is fresh or for renewal. As long as the acceptance and rejection is as per such underwriting policy, the insurer can't be forced to accept any risk which otherwise could have been rejected based on such policy.
Q. Has portability brought some substantial change in the health insurance industry in terms of competition and customer retention?
A. The purpose of portability is to provide a mechanism or a system which enables the policyholder to shift the policy from one insurer to another in case of dissatisfaction with respect to the existing policy or the services or to switch over to an innovative/another product which could be available elsewhere. In the current quarter, so far, 1,061 policies have been ported and 31 cases have been rejected. There are about 81 requests which are under process.
Q. When porting a policy, the customer loses out on cumulative bonus. Even the underwriting process is changed (as a result higher premium may be charged for a similar cover). Terms and conditions, inclusions and exclusions can also change. Does this mean that, apart from accrued continuity benefits, there is not much that can be ported?
A. In case of porting, the customer will not lose credit for previous policy years which have been spent with the previous insurer. In the absence of portability, the policyholder, if he takes a fresh policy, will have exclusions for pre-existing diseases and others afresh up to four years. However, with portability, this is protected and enables the policyholder to move freely from one insurer to another. Apart from that, the cumulative bonus can be protected by charging a premium.
Q. Do you think standardisation of health products can help in bringing full portability?A. Standardisation will render the whole question of portability redundant, as is the case in a standardised RSBY coverage which can be availed in any part of India. But on the other hand, standardisation will deny society the benefits of innovation in product design, which is a desirable feature.
Q. IRDA has asked the health ministry to come out with standard protocols for treatments. How will this benefit the industry and by when can we expect this to be implemented?
A. Standardisation of protocols will help in improving the quality of healthcare. The second benefit will be on pricing, which will be subject to greater competitive scrutiny.
Q. Some experts are saying that the draft guidelines, if implemented, could lead to a rise in premium rates. Is that correct?
A. The draft guidelines in itself do not create any cost push. Most of the elements in the draft guidelines are part of the existing set of regulations, circulars, etc. On the other hand, it will lead to more transparency, which will be a great benefit to policyholders.
Q. One of the complaints of standalone health insurers is that they are unable to utilise the bancassurance channel as the current regulations allow banks to partner with only one general and one life insurance company. Since other general insurers have additional verticals (such as motor and home) and, thereby, have a bigger product bouquet, banks are more interested in partnering with them. Do you think this is hindering the growth of standalone health insurers?
A. For years 2009-10 and 2010-11, the rate of growth of standalone health insurers was much higher than the growth of other general insurers. However, in 2011-12, the growth of standalone health insurers is lower than that of general insurers as a class. We are still in the process of analysing the reasons for such a development. I am not persuaded that the lack of bancassurance channel is the sole or even the principal cause as the proportion of products sold through bancassurance is low compared to total sales.
