Insurers can’t walk out of convention mid-term: IRDA

In a move that will benefit health insurance customers, IRDA has said that companies can not cancel insurance policies in the medium term. The move, sources say, is in response to complaints from policyholders of health insurance contracts that were terminated before the end of a year due to higher claims.

In a circular to all companies on this week, the Insurance Regulatory and Development Authority said not political, either fresh or renewal can be sold with a clause contrary to the rules of cancellation. The rules allow cancellation if there is fraud, misrepresentation or nondisclosure of a material fact of the insured.

However, the industry says it would be unusual not to have a cancellation clause. "Historically and internationally has been the practice of having a facility of cancellation available to both the insurer and the insured after giving sufficient notice to use other arrangements," says G Srinivasan, President, General Insurance Public Sector and head of U.S. Insurance Company in India. He said the termination clause was important in cases where the cover was based on reinsurance support from reinsurers also include a similar clause.

Pavanjit Singh Dhingra care insurance brokers said the cancellation of insurance policies due to adverse claims violated the trust policyholders. In the past there have been cases in which the offer to increase its topline, insurance companies, have acquired a group of practices is very low. However, after burning their fingers high claims have not used the escape clause.

"It is incumbent on insurers to do their homework and purchase appropriate and bear the risk of the contract. What is the purpose of insurance if the insurer can move away from risk, at its discretion? Sometimes insurance companies have been ruthless in underwriting policies and cancellation or attempted to renegotiate the terms of the insurance period which is totally unfair, and we welcome this action to protect policyholders, "said Dhingra.

Health Insurance is the Need of the Hour

Health insurance has become a necessity in today’s world. There are several reasons for an individual to have the protection of health insurance

Of all the risks which an individual household faces, health risk probably poses the greatest threat to lives and livelihoods. Everyone needs medical care sometimes and health falls with age. Sedentary life styles, hectic work schedules, long working hours and eating habits are leading to silent diseases causing rise in the number of people suffering from obesity, diabetes and cardio-vascular diseases. As per a Government of India report of 2006, morbidity rate for males is 8.5 per cent (rural) and 9.1 per cent (urban) and for females 9.3 per cent (rural) and 10.8 per cent (urban).

The other important risk faced by individuals is the risk of accident. As per a report in the National Medical Journal 2.5 million persons were hospitalised due to road accidents in 2005 and it is projected to be around 3.5 million in the year 2015.

There has been high escalation of medical costs due to advancement and high tech intervention in health, diagnosis and therapeutic procedures as well as prescription drugs. We live in a system of patent protection-a legal monopoly to pharmaceuticals that has been making the new drugs expensive and increasing the cost of care.

The explosion of knowledge in genetic engineering, biotechnology, nano-technology, medical informatics and gene therapy will further escalate the costs for most people.

As per a study of NCAER in association with Max New York Life Insurance Company, the average medical expenses of an Indian household is 6.5 per cent of the annual income and it increases sharply to around 37.4 per cent in case of major ailments. According to a study “India Knowledge @ Wharton Report” around 65 per cent of people remain in debt for life due to their expenditure on major health problems.

Health insurance is the ticket to healthcare and the best mechanism to finance healthcare to protect one’s savings, avoid debts and miseries.

National Insurance has been a major player in the health insurance segment in the country. It has in its basket 18 types of health policies to cater to the needs of the different segments of the society. In addition, the company has also been involved in the implementation of Rashtriya Swasthya Bima Policy in 50 + districts in the states of Haryana, Bihar, Assam, Tripura, Mizoram and West Bengal.

For the year 2010-11, National Insurance completed a health insurance premium of Rs 1681 crores out of the industry’s total health insurance premium of Rs 11,137 crores mobilised by 22 multi-line non-life and three mono-line health insurance companies. The company issued 14.47 lakh of health insurance policies covering 2.39 crore of persons. It paid 4.11 lakh number of claims amounting to Rs 1399 crore during the year.

Health insurance is the fastest growing non-life insurance segment and it is estimated to grow at a CAGR of 35 per cent during the next four to five years. Increased awareness, expanding aspiring class, rise in health costs, government initiated schemes like RSBY for the BPL population, construction workers and street vendors etc., have given a big boost to the health insurance segment.

The company has geared up to play a significant role in this high growth business through planned participation in the different segments like government schemes, retail and wholesale. Though losses has been a cause of concern in this business to all the players, the company plans to manage it sustainably by initiating a number of measures like proper monitoring of TPAs, creation of health cells in regional offices commanding high volumes of health business, emphasising on investigation and fraud control etc.

Health policies by life insurance companies will not be portable

Your plan to switch your existing health insurance policy from a non-life insurer to a life insurance company may not be possible, at least for now. The insurance regulator is likely to confine the portability of health insurance policies to non-life insurance companies.

“To start with, only mediclaim policies offered by general insurance companies will be portable. Health insurance policies offered by life insurance companies, which are much more complex in nature, will not come under it,” said a senior official of the Insurance Regulatory and Development Authority (Irda).

One of the primary reasons for not extending the facility is that the term of the policies offered by general insurance companies is one year. However, for life insurance companies, it is long-term, raging between three and 15 years. Portability allows a policyholder to shift the policy offered by one insurer to the other, while keeping the terms and conditions of the cover unchanged.

“Most health plans offered by life insures are indemnity policies or benefit policies, which are associated with lump sum benefits at the end of the term, subject to certain pre-specified conditions. Hence, it is very difficult to port credits, since these policies require completely different underwriting techniques,” said a life insurance company official.

“More than 90 per cent of the health insurance business is confined to the general insurance industry. Policies offered by general insurers are fixed-benefit plans and are renewed annually. This is different from plans offered by the life insurance companies. So, portability between health products offered by life and non-life insurance companies is not feasible,” said a senior official at a state-owned general insurance company.

In short, for mediclaim policies, there are no survival benefits or life covers. So, general insurance companies would not be able to service these kinds of health insurance plans, he the official said.

Another aspect is the pricing of the policies. “One of the important issues is how to price the benefits. Different companies offer different benefits to add exclusivity to their products. For instance, in the case of portability, one has to forgo some benefits. Thus, the policyholder might claim some discount, which the insurer might not allow,” said an actuary in a life insurance company. Top Engineering Colleges

Last week, the insurance regulator decided to postpone the execution of portability of health insurance policies by three months to October 1, as industry officials sought more clarifications from the regulator.

In a bid to facilitate data sharing among insurance companies, Irda had embarked upon providing a web-based facility for insurers to feed in all relevant details on health insurance policies issued by them. This data would be accessible by the company to which a policyholder wishes to port his policy. “Such a system would enable the new insurer to obtain efficiently data on history of health insurance of the policyholder wishing to port. It is necessary to enable the smooth running of the system,” Irda had said.

Domestic workers now covered under health insurance scheme

There is good news for 47.50 lakh domestic workers in the country: they will now be entitled to health insurance cover under the Rashtriya Swasthya Bima Yojana (RSBY).

The extension of the medical insurance scheme, approved by the Union Cabinet here on Thursday, envisages smart card-based cashless health insurance cover of up to Rs. 30,000 under any empanelled hospital anywhere in the country.

The RSBY would be extended to registered domestic workers in the 18-59 age group, Union Information and Broadcasting Minister Ambika Soni told reporters after the Cabinet meeting. The majority of them were women.

Earlier this month, the Cabinet had approved extension of the scheme to 55 lakh beedi workers by 2013-14.

The funds for the scheme would be allocated from the National Social Security Fund for Unorganised Workers. The premium will be shared by the Central and State governments in the ratio on 75:25. In case of North East Region and J&K, the ratio will be 90:10.

The estimated expenditure to be borne by the Centre will be Rs. 29.70 crore in 2011-12, Rs. 74.25 crore in 2012-13, Rs. 148.50 crore in 2012-14 and Rs. 297 crore in 2014-15.

Domestic work form one of the largest sectors of female employment in the urban areas. Domestic workers are unorganised and the sector remains unregulated and unprotected by labour laws. These workers come from vulnerable communities and backward areas and most of them are illiterate, unskilled and do not understand the urban labour market.

The beneficiaries would have to get identification certificates from any two of the four institutions -- the employer, resident welfare associations, registered trade unions or the police, Labour and Employment Minister Mallikarjun Kharge said.

The upper limit of the annual contribution would be Rs. 750 per beneficiary — of which the Centre would bear Rs. 565 — and another Rs. 60 for the smart card, she said. A maximum of five members per family would be covered.

The Rashtriya Swasthya Bima Yojana provides for smart card based cashless health insurance cover of Rs. 30,000 annually to below poverty line (BPL) workers (a unit of five) in the unorganised sector and is being presently implemented in 25 States and Union Territories. The scheme has since been extended to building and other construction workers registered with the welfare boards constituted under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, street vendors, beedi workers and such Mahatma Gandhi National Rural Employment Guarantee Scheme who have worked for more than 15 days during the preceding year.

Asked whether a law would be brought to protect the rights of domestic helps as suggested by National Advisory Committee Chairperson Sonia Gandhi, Mr. Kharge said, "the issue [of making a law] came up recently. As of today, we are extending the benefits of an existing programme to domestic workers".

Mr. Kharge said a task force, constituted in December 2009, had recommended among other things the extension of RSBY to domestic workers.

The extension of the scheme would not only provide them insurance benefits, but also help in preventing their exploitation, Ms. Soni said. It would also lead to registration of workers and placement agencies.

General insurance IPO norms on way

The insurance regulator will come out with a separate set of guidelines for general insurance (non-life) companies that are looking to tap the capital market with initial public offerings. The regulator is waiting for Sebi’s recommendations on the disclosure requirements.

According to R.K. Nair, member (finance and investment) of the IRDA, the disclosure requirement for non-life insurance companies will be different from those of life insurance firms given the nature of cash flows and risks underwritten by them.

“We are awaiting the recommendations of SCODA (Sebi Committee on Disclosures and Accounting Standards) which is still working on the disclosure requirements for non-life insurance companies. Once we get these recommendations, we’ll come out with the IPO guidelines,” Nair said on the sidelines of an insurance summit of the Indian Chamber of Commerce here today.

He declined to give any time frame for releasing the guidelines.

Early this week, the Insurance Regulatory and Development Authority (IRDA) unveiled draft IPO guidelines for life insurance companies. In the draft, the requirement that an IPO applicant should be profit-making has been replaced by the condition that the embedded value of a life insurer must be twice the paid-up equity capital of the company. The embedded value is the value of all in-force policies plus the net worth of a life insurance company.

Norms for common TPA may be ready in 3 months

The proposed regulations for common Third Party Administrator (TPA) to check excess mediclaim bills by private hospitals is expected to be ready in the next three months. Accordingly, a common TPA is expected to help insurance companies control both health insurance premiums and claims.

Last year, the four general insurers namely National Insurance Company, New India Assurance, Oriental Insurance and United India Insurance had decided to set up a common TPA as a joint venture to manage health insurance claims. Concerned about over-billing, the insurers had even barred about 150 private hospitals from the list of preferred provider network (PPN) offering cashless medical facility. But, later the services were resumed by some providers after a dialogue between the hospital administrators and the insurance regulator, Insurance Regulatory and Development Authority (Irda).

‘‘With the formation of a common TPA, the health insurance business will come together and we will be able to negotiate better with service providers. We hope that it should be ready in the next three months,’’ G Srinivasan, CMD, United India Insurance Ltd, said. He was in the city here for signing an MoU with State Bank of Hyderabad (SBH) to provide free personal accident insurance to provide ‘‘group Janata personal accident insurance coverage’’ to all individual operative savings bank account holders of the bank.

Typically, TPAs are companies to which insurers outsource servicing of health insurance claims. They are approved and regulated by Irda and undertake a majority of the back office work including networking with healthcare providers after the insurance company issues a policy. They charge about 5% of the premium as fee to process a policy. Over 27 TPAs are so far registered with Irda....

LIC Jeevan Arogya – In Good Health medical cover for your parents

Escalating medical expenses are a cause for concern not only for the elderly, but also for those in their middle age. As health awareness increases not just regular insurance companies, but life insurance companies too are coming up with new health policies.

LIC has recently launched Jeevan Arogya, a non-linked health insurance plan that provides health insurance cover against specified health risks, with benefits such as daily hospital cash benefits, major surgical benefits and day care procedure to meet medical emergencies. In the event of any major illness suffered by the insured, the plan allows waiver of premium for the subsequent one year.

WHAT'S ON OFFER

* Guaranteed coverage for the policyholder up to the age of 80 and his family including parents and parents-in-law against medical expenses incurred due to hospitalisation.

* Financial protection in case of hospitalisation and surgery

* Automatic increases in cash benefits every year at 5 per cent

* Fixed benefits to the individual irrespective of the cost incurred

* No-claim benefit of five per cent, for three claim-free years

* Flexible premium payment options with rebates and discounts for higher premium

* Sum insured increases by 5 per cent a year, to the maximum limit of 1.5 times of the initial sum insured.

* Fixed premium for first three years, irrespective of the claims. Age at entry is the base for all future premiums till the policy is in force.

* Riders such as term insurance and accident benefit. The overall cover under the plan inclusive of the two riders is Rs 10 lakh.

* Tax benefits under section 80D available for all health insurance.

HOW IT WORKS

Individuals can choose the amount of daily hospital cash benefit (HCB) as per their estimated requirements. The plan allows a minimum of Rs 1,000 per day and maximum of Rs 4,000 per day to cover the daily cost of hospitalisation. For instance, for a family of six with parents above 70 and principal insured at 40 for a sum insured of Rs 2 lakh each the premium will works out to a maximum of Rs 31,502(before any rebate).

Daily hospital cash benefit: If the principal insured or any of the persons covered under the policy are hospitalised due to accident or sickness and stay in hospital for more than 24 hours in non-ICU ward an amount equal to HCB will be paid for 30 days in the first year and 90 days from the second year. In the event they stay in an ICU an amount equal to twice the HCB will be paid for 15 days in the first year and 45 days from the second year. This will be within the overall limit for each year.

Major Surgical Benefits (MSB): 100 times of the HCB or applicable daily benefit with an increase by five per cent from the second year onwards. For instance, if the HCB is Rs 2,000 in the first year, it will increase by five per cent to Rs 2,100 (daily cash benefit) from the second year onwards. MSB benefit will be available for minors also. The total number of surgeries covered under the plan is 140. The sum insured is payable based on the categorisation of surgery and it varies from 40-100 per cent.

Day Care Procedure (DCP): In the event of the insured undergoing for any of the 140 day care procedures LIC has specified, the amount paid will be equal to five times of the daily benefit and it will be allowed three times a year and 24 times for whole of the policy.

Other surgical procedures: In the event of the insured undergoing surgery not listed under the above options, and is hospitalised for more than 24 hours then two times the daily cash benefit will be paid for 15 days in the first year and 45 days in the subsequent years.

Quick cash facility: An advance of 50 per cent of the major surgical amount will be paid to the insured for the specified surgeries. To avail the benefit insured has to inform the LIC or the facilitator for the claims. After the latter processes the request LIC credits the eligible amount to the policyholder's bank accounts.

OUR TAKE

With health insurance plans netting large losses for general insurance companies, they have imposed many restrictions on insuring older family members. Hikes in premia too have been steep. Individuals finding it difficult to include their parents/parents in-law in their existing policies may find this plan suitable to their needs. However, LIC Jeevan Arogya has a cap on entry age at 75.

You should also note that a health policy offered by life insurance companies can only supplement health policies offered by general insurers. The health policies are an indemnity plan - the hospital expenses are reimbursed up to a maximum sum insured without any limitation. The health cover offered by life insurers are benefit plans and the cover is restricted by various conditions.

The advantage under the Jeevan Arogya is that pre-existing diseases are covered after two years, against the usual four-year waiting period . However, the premia during the initial years are higher compared to the top-up plans offered by the general insurer. But an individual signing up for this plan at an early age has the potential to save on premium later .

This plan is ideal for self-employed professionals, people with a family history of critical illness and for those above 65 who do not have a medical cover.