Health Insurance Policies for 5 Years on Pilot Basis Soon

Soon, you may be able to enroll into or renew into a health insurance policy for 5 years. An expert committee on insurance has recommended creation of closed-ended, five year long policies on an experimental basis.

The policy would be comprehensive—covering risks usually excluded or declined by most insurers but the insurers have an option to renew it or not at the end of five years. This would encourage creation of new and innovative products.

The committee, submitting its report to Insurance Regulatory and Development Authority of India (IRDAI) has recommended creation of long term health savings schemes by health insurance providers. The committee had members from IRDAI as well as General Insurance Council, and is expected to look into upholding policyholder’s interests besides financial matters, distribution and composition of products.

On a pilot basis, these products can be launched for five years, the report said. If successful, insurers may continue the product as a regular policy, subject to various provisions of renewability.

Since medical costs are increasing and premiums need to take care of this inflation, the committee has recommended creation of a benchmark. This benchmark would be three percent over Consumer Price Index (CPI) which would automatically cover medical inflation. This benchmark is a ceiling up to which the premium can be increased by the insurer without IRDAI approval.

Recommendations on long term health savings plans

Entry-age based pricing: Among the recommendations is the one that seeks to reward individuals for joining the health insurance pool early in life especially when they are relatively immune from risks and stay insured. This means an individual entering the pool at 45 will be charged a higher premium than someone who has bought insurance at 40 and has renewed it for next 5 years.

Fraud must be checked: Insurers and TPAs have systems and policies in place to track, control and deal with insurance related fraud (including hospitals) which they must make full use of, the recommendations noted. Additional systems and internal processes must be put in place by them.

A joint body for fair interpretation of policy terms: The recommendations included bringing clarity and transparency to the policy term and conditions so that they know properly about inclusions and exclusions. IRDA and GIC should set up a panel to fairly interpret this contentious issue between the insurers and the insured.

Tax incentives for contributing to long term health savings plan: The committee also recommended tax exemption to those who contribute to the long-term health savings plans. However, it cautioned against having ULIPs as an element of such plan because such savings must be protected from market-related fluctuations.

Premium discounts for wellness and preventive care: Individuals should be rewarded for opting for preventive care and wellness which may in the long run bring down their chances of being sick. The recommendations also favored a premium discount feature for individuals enrolling into such programs.

These recommendations, if affected can see few changes in health insurance sector in coming days.

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