The regulator has set up a nine-member committee with former New India Assurance Chairman and MD G Srinivasan as Chairman and LIC Chairman MR Kumar as Co-chairman to study the feasibility of allowing life insurers to offer indemnity-based health policies.
The Insurance Regulatory and Development Authority of India (IRDAI) is considering the possibility of allowing life insurance companies to offer health policies despite opposition from general insurance companies.

The regulator has set up a nine-member committee with former New India Assurance Chairman and MD G Srinivasan as Chairman and LIC Chairman MR Kumar as Co-chairman to study the feasibility of allowing life insurers to offer indemnity-based health policies.

As of now, only general insurance firms and specialised health insurance companies are allowed to offer indemnity-based health policies. The IRDAI move follows intense lobbying by private life insurance companies for an entry into the fast-growing health insurance segment. “IRDAI (Health Insurance) Regulations 2016 allow life insurance companies to offer benefit based health insurance products only. Representations have been received from life insurance companies to allow them to offer indemnity products as well,” IRDAI said.

However, the General Insurance Council, the apex body of general insurers, has opposed the proposal. “It’s not correct to say that all life insurance companies in India are demanding opportunity to sell indemnity-based health insurance policies. Only a couple of pocket-sized life insurance companies, sensing a big business opportunity in health insurance sector, are clamouring for opening the indemnity-based and short-term health insurance business to them. They are basing their arguments mainly on a few points and unfortunately all of them are absolutely incorrect,” said an official of the council.

“The benefit oriented critical illness covers are already within the business purview of life companies and they hardly market those covers. Many of us are not even aware about the availability of such covers, leave alone buying them. Before they clamour for indemnity-based health business let the life insurance industry better market whatever is already within their purview,” he said.

Another complaint against life insurers is mis-selling. “One major problem the life insurance industry is besieged with is rampant mis-selling. It is time they first put their house in order before thinking of unchartered areas,” the council official said, adding, “indemnity based health insurance business needs enormous claims handling capacity and that too under very tight time lines. Where is the experience and capability for these very small life companies that are clamouring for new avenues? The real big ones are fully conscious of their role, responsibility and limitations and are not keen on this.” “Life insurers were earlier allowed to sell these products and were not allowed afterwards. They should be allowed again,” said the CEO of a private life insurance firm.

Insurance Act, 1938 vide Insurance Laws (Amendment) Act 2015 recognised health Insurance as a separate class of business. Historically, health insurance is recognised as one of the important elements of healthcare and health insurance premiums have been registering a significant compounded annual growth of around 20 per cent in the preceding 10 years in India, IRDAI said.

According to insurance experts, in an indemnity-based health insurance plan, the policyholder is reimbursed the cost of medical expenses. These plans will reimburse the policyholder with the actual amount incurred as expenses during a hospitalisation stay up to the sum insured under the policy. If a policyholder chooses a sum insured amount of Rs 5 lakh and is presented with a hospitalisation bill amounting to Rs 2 lakh, the insurance company will pay out Rs 2 lakh to the policyholder. The policyholder is required to submit hospital bills detailing the expenses incurred during the hospital stay.

On the other hand, a fixed benefit health plan is one where a fixed amount of funds (the sum insured) is paid out to cover expenses for a predetermined illness or condition that has been insured. During FY 2017-18, insurance companies collected Rs 37,029 crore as health insurance premium registering a growth of 21.8 per cent over the previous FY 2016-17. The share of group health insurance was the highest at 48 per cent, followed by individual business (41 per cent) and the government business (11 per cent). Five states — Maharashtra, Tamil Nadu, Karnataka, Delhi UT and Gujarat — contributed 68 per cent of total health insurance premium, IRDAI says. As per IRDAI Annual Report 2017-18, the insurance sector has covered 48 crore number of lives under health insurance, out of which 36 crore number of persons are covered under various government schemes.

The industry has processed 1.6 crore number of health insurance claims during that year. The PMJAY scheme launched in September 2018 had 18 lakh plus pre-authorizations approved amounting to over Rs 2,400 crore as on March 31, 2019. Another major concern in health insurance business is skewed distribution of health business across various states and union territories.