IRDA rules aim to standardise health insurance norms

Vivek Sharma
Financial Planner and Trainer

There is a standard disclaimer in mutual fund advertisements which expects investors to read the offer document carefully before investing. While reading offer documents and other relevant documents is a must for every financial product that we buy, nowhere it is more relevant than health insurance. Health insurance policy holders often complain about claims being denied by insurance company on frivolous grounds. While some of such claims may be valid, many of them arise from the fact that policy wordings are not read properly and understood by the insured. Many health insurance policy holders have also been complaining about the fact that insurers often used different terminologies and wordings which are confusing and used as a tool for rejecting claims.

In order to avoid ambiguity, the insurance regulator, IRDA, has come out with guidelines which aim to standardize health insurance practices in the country. The most important aspect of these guidelines is the standardization of 46 terms used in context of health insurance policies. For example, the new guidelines define pre-existing disease as,’ Any condition, ailment or injury or related condition(s) for which you had signs or symptoms, and / or were diagnosed, and / or received medical advice / treatment within 48 months to prior to the first policy issued by the insurer’. This definition allows insurance companies to define norms for applicability at reinstatement. Similarly a concept like ,’Hospital’ has been defined in the new guidelines. One of the key condition in the definition of hospitals is that a hospital should have at least 10 inpatient beds, in those towns having a population of less than 10,00,000 and 15 inpatient beds in all other places. Also as per the new guidelines hospitalization means a minimum stay for 24 hours in hospital.

In order to avoid any issues related to critical illness, these guidelines have specified conditions for critical illness. As per IRDA guidelines,’ In view o f resolving the differences in the definitions o f terms on Critical Illnesses adopted by the different insurers which are creating confusion in the minds o f consumers and the industry especially at the time when insurers and re-insurers have to arrive at a point where lump sum payment is made, 11 Critical Illness terms have been standardized to be adopted uniformly across industry, if offered under the product. All products offering the 11 critical illness coverage shall ensure that definitions o f the stated 11 terms are in line with the stipulated definitions.’

Additionally, the new guidelines have also standardised the pre-authorisation and claim forms which will reduce hassles for policyholders. The guidelines also provide for standard list of standard list of excluded expenses in hospitalization indemnity policy. With these guidelines coming into place, it won’t be possible for insurance companies to define insurance concepts on their own and will result into industry wise standardization. If you are planning to buy health insurance, it is important that you go through these guidelines of IRDA once.