Will The Insurance Watchdog's New Policy Guidelines Finally Address Policyholders' Trust Deficit?

Insurers acknowledge that the problem is magnified due to rampant mis-selling of products amid intense competition. Not just that. Hospitals have also been found inflating bills or conducting unnecessary treatments and tests on patients who are insured. Whatever be the case—the victim has been the policyholder.

But finally, will the Insurance Regulatory and Development Authority of India (IRDAI)’s recently released master circular address customers’ grievance and curb mis-selling of insurance products? As per the master circular, health insurers will not be allowed to reject any claim for want of documents. The insurers will have to settle claims within specified timelines or face penalties.

Not only has the regulator mandated insurers to honour all claims irrespective of documentation, it has also said that all the required documents must be called at the time of underwriting the proposal. The customer, however, may need to submit only those documents that are directly related to the claim settlement.

Health Insurance Settlements Coming Down

The IRDAI’s annual report  shows that during 2022-23, general insurers have settled only about 86 per cent of the total number of health-related claims registered in their books against about 100 per cent in 2021-22.  About 8 per cent were repudiated. This is despite a steady jump in the health insurance premium.

According to a LocalCircles research, out of the 11,000 health insurance policy owners who were surveyed, 52 per cent indicated that their premium increased by over 25 per cent in the last 12 months. In fact, 21 per cent of health insurance policy owners indicated that the hike in premium was 50 per cent or more.

“The IRDAI circular will definitely drive the industry to offer simpler customer-centric products, ease claim settlement, and bring in the concept of customisation… a welcome move, indeed,” insurance industry expert Yateesh Srivastava said, adding that retail customers have gone through “nightmare” “as insurers keep calling for documents at the time of settling claims.”  During 2022-23, general and health insurers have settled 2.36 crore number of health insurance claims and paid Rs 70,930 crore towards the settlement of health insurance claims.

“It lays emphasis on customer choice in product offerings and aims to drive a more flexible product regime with customisations possible,” Srivastava said.

Easier portability of health insurance policies with information sharing between insurers, coverage for all age groups irrespective of pre-existing conditions, and greater choice for customers, who will be allowed to opt for premium discounts or increased sum insured for claim-free years are among the key pointers of the master circular.

Insurers worried

Unsurprisingly, concerns for the insurance industry have risen. In several cases, hospitals have taken advantage of patients’ health insurance policy by rendering added tests and treatments. False medical certificates are also common. “This is a problem but we need to understand that the patients cannot be put through inconvenience... how to deal with the issue needs to be looked into at some point,” an industry insider said. An effective mechanism by which disputes can be resolved between hospitals and insurers needs to be carved out as well, he added.

“The IRDAI’s master circular aims to bring about systemic changes in the general insurance industry to improve customer experience and confidence in general insurance products, streamline claim settlement processes, and offer wider coverage options,” Abhilasha Jaju, Director, BFSI vertical, 1Lattice said, adding that Hospitals cannot charge extra for delays caused by insurers.

Insurance products must act as a financial safety net by ensuring that patients do not have to dip into their savings for out-of-pocket expenses. Treatment costs can easily wipe off savings and even lead to crippling debts severely impacting the economy.

The IRDAI master circular is well intended but it will take time for trust to build between insurers and policyholders.