IRDAI Announces New Rules to Make Health Insurance More Customer-Friendly

Taking another step towards “Insurance for All by 2047,” the Insurance Regulatory and Development Authority of India (IRDAI) recently released a master circular aimed at making health insurance policies more inclusive, flexible, and customer-friendly. From reducing cancellation charges in indemnity-based health insurance policies to specifying how to offer a no-claim bonus and making claim-settlement procedures more transparent, the regulator has introduced key rule changes to empower health insurance policyholders. ET Wealth Online explains what these changes mean for health insurance customers and how they will benefit policyholders.

Higher Refund on Cancelling Health Insurance Policies

Policyholders can now discontinue a health insurance policy at any time and get a refund of the premium on a pro-rata basis, provided no claims have been made. All they need to do is give their insurer a seven-day notice in writing.

Previously, the refund on the premium was not on a pro-rata basis. Abhishek Kumar, a SEBI-registered investment advisor and Founder of SahajMoney.com, explains, “Earlier, if one cancelled the policy within one month, three months, or six months after the completion of the free-look period, the refund of the premium amount would be 75%, 50%, and 25% respectively. Cancelling a policy six months after the free-look period typically resulted in no refund.”

Now, the refund will be a “proportionate premium for the unexpired policy period if the term of the policy is up to one year and no claims have been made during the policy period,” according to the new guidelines. For policies cancelled after a year, the insurer must refund the premium for the unexpired policy period, provided that the risk coverage for those future policy years has not commenced.

“A notable aspect of the new guidelines is the reduction of the notice period for policy cancellation from 15 days to just seven days,” says Bhaskar Nerurkar, Head of the Health Administration Team at Bajaj Allianz General Insurance. Further, the circular does not mention any additional administrative fees or penalties for cancellation, simplifying the process and making it more favorable for policyholders. 

No-Claim Bonus for Health Insurance: Options to Reduce Insurance Premium

The regulator has specified how insurers can offer no-claim bonuses to policyholders. Traditionally, auto-insurance plans offered a no-claim bonus by reducing the renewal premium if there was no claim in the previous year. For health insurance policies, insurers usually increased the sum insured at renewal if no claims were made.

Now, insurers can provide two options during annual renewal if no claims were made during the year:

1. Cumulative Bonus: The sum-insured amount will increase without a hike in the premium amount.

2. Discount on the Premium: Policyholders can choose either of these options and must provide consent each year at the time of renewing their health insurance policies. Amid rising premiums, this reduction offers some much-needed relief to policyholders.

No Health Insurance Claim Can Be Rejected Without CRC Approval

The regulator has asked insurance companies to set up a three-member Claims Review Committee (CRC) to review all claims. Insurers cannot reject any claims without the committee’s approval. IRDAI states, “In case the claim is repudiated or disallowed partially, details shall be conveyed to the claimant along with full details referencing the specific terms and conditions of the policy document.”

Furthermore, insurers and third-party administrators (TPAs) must collect required documents from hospitals, ensuring that policyholders are not burdened with submitting these documents.

Higher Penalties for Not Complying with Ombudsman Orders

Insurance companies now face higher penalties for delays in implementing an ombudsman’s order. Companies must comply within 30 days, failing which they must pay a penal interest of two percentage points above the prevailing bank rate.

Insurers Must Display Key Details on Their Websites

To assist consumers, IRDAI has mandated that insurance companies clearly display the following information on their websites:

– Hospitals/healthcare service providers with whom they have a tie-up for cashless claim settlement.

– Hospitals/healthcare service providers on the list of the common network of hospitals.

– Information required for policyholders to claim reimbursement when using non-empanelled hospitals.

– Procedures for claim settlement.

– List of available and withdrawn products.

These measures help policyholders stay updated and access necessary details quickly, especially during planned treatments or emergencies.

Welcoming these moves, Sanjiv Bajaj, Joint Chairman & MD of BajajCapital Ltd, says, “These measures are expected to increase the adoption of health insurance across India and foster higher levels of trust between insurers and policyholders. With stricter review processes and a focus on high standards of customer service, IRDAI is ensuring a more transparent and reliable health insurance environment, ultimately benefiting the consumer.”