Green will mean a simple product, orange a moderate product, while red will be a complex category health insurance product
To make health insurance more customer friendly, every such medical plan by a general insurer or standalone health insurer will soon carry a colour code.
The colour codes will indicate the level and extent of the complexity of the product.
Earlier, mutual funds had a colour-coding system to denote the riskiness of the product. However, that has now been replaced by labels showing high risk or low risk.
The Insurance Regulatory and Development Authority of India (IRDAI) has said that to calculate whether a health plan is simple or complex, a set of scores will be given to the product based on its terms and conditions.
Here, factors like number of optional covers, percentage of co-pay, waiting period, permanent exclusions, number of treatment, and simplicity of terms will be considered for deciding on a score for the product.
Products with a score of 2 or less will be classified green, more than 2 and less than 4 will be orange, while those above 4 and up to 6 will be red.
More the number of optional covers and percentage of co-pay, higher will be the score.
For example, if a health insurance product has 5 optional covers, then the score of the product on this parameter will be 3 considering that each optional cover has 0.6 as score.
Similarly, a score of 0.3 is given for every 1 percent rise beyond 5 percent in co-pay, subject to a maximum score of 6.
In case of multiple options, the average of the options shall be considered. For example, if a health product has two options of 10 percent and 20 percent co-pay then the average co-pay shall be 15 percent.IRDAI has asked stakeholders to present their views on this colour-coding scheme by October 15.