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Do the insurance regulator’s standard health product guidelines benefit you?

From April 1, all general and health insurers will have to offer a standardised health product.

January 06, 2020 / 08:18 PM IST

The Insurance Regulatory and Development Authority of India (IRDAI) has brought some New Year cheer for health insurance customers. It has issued the final guidelines on the standard health insurance product that all general and health insurers will have to offer from April 1, 2020.

The purpose is to make the process of choosing a health policy simpler.

Offering a simpler product

Many prospective policyholders find the terms and conditions of these policies complex to decipher. This complexity leaves scope for disputes at the time of claim settlement in the future. A product with a uniform structure, thus, will give them more confidence. However, you will continue to have the choice of buying other health products from insurers’ portfolios. The standard product is simply an additional option.

“It will play a role in increasing health insurance penetration in the country, more so into tier 2 and tier 3 cities. It will make decision-making easier for first-time buyers in these cities. The standardised features will reduce confusion,” explains Gurdeep Singh Batra, Head, Retail Underwriting, Bajaj Allianz General Insurance.

Here’s a guide to understanding the features and clauses of the product, which will be branded ‘Aarogya Sanjeevani,’ followed by the insurer’s name.

The nuts and bolts

You can buy this product from any general or health insurer and yet be assured of standard features and clauses. You can also cover your spouse, dependent children, parents and parents-in-law under a family floater plan. It’s a no-frills plan that comes with no add-on riders or zone-based pricing. Besides room rent sub-limits, it also comes with a 5 per cent co-pay clause. So, if your approved claim amount is say Rs 1 lakh, you will have to pay Rs 5,000, while the insurer takes care of the balance. Given that some policies mandate co-payment of up to 30 per cent, this is a reasonable proportion that can eliminate frivolous claims.

It will cover as well as expenses incurred on day care procedures such as chemotherapy and radiation. Like existing health policies, it will cover pre-hospitalisation expenses incurred 30 days prior to admission and 60 days after discharge.  Cumulative bonus that can be offered by insurers, too, has been specified. For every claim-free year, your sum insured will increase by 5 per cent, but the overall cap is 50 per cent. However, the premium will be determined by the insurers.

“Premiums could vary as per insurers’ underwriting policy, but the benefits you get will be uniform across insurers.  This clarity on terms and conditions will ensure smoother claim settlement,” says Amit Chhabra, Business Head, Health Insurance, Once such products are rolled out, along with claim settlement track record, over a period of time.

Know the merits

Policyholders will not have to worry about hidden terms and conditions as these will be standard across all non-life insurers. The uniform structure will make switching from one insurer to another seamless. Since the IRDAI has clearly defined waiting periods for some conditions, the scope for disputes, too, will shrink. It ranges from 24 months to 48 months, depending on the illness. For example, conditions such as tonsillectomy, hernia and piles will not be covered during the first 24 months from the date of policy issuance. Age-related osteoporosis and joint replacement procedure will be covered only after 48 months, unless necessitated by an accident.

Understand the limitations

While a uniform product is a great move towards transparency, it could fall short of expectations for certain segments of insurance-seekers. This is because the product will come with a room rent cap of 2 per cent of the sum insured or Rs 5,000 per day, whichever is lower. For intensive care unit (ICU) expenses, these limits go up to 5 per cent of the sum insured, subject to a maximum cap of 10,000 a day. So, if you live in a metro city and prefer single rooms in high-end corporate hospitals, you will end up shelling out a lot more from your pocket, as the room rent could be higher than Rs 5,000.

Importantly, hospital charges – including doctor’s fee, nursing and operation theatre expenses – are linked to the room rent. So, the entire eligible claim amount will come down proportionately. In other words, you should not be under the impression that you will only have to foot the bill for the difference between the actual room and eligible room rent per day. For evolved insurance-seekers who do not wish to settle for anything less than premium hospitals, this product may not satisfy their requirements.

Preeti Kulkarni
first published: Jan 6, 2020 11:09 am