Three years after the Insurance Regulatory and Development Authority of India (IRDAI) asked life insurers to withdraw indemnity or reimbursement-based health plans, the companies are now seeking a revival of a level playing structure. This will offer better product choices to customers.
Sources told Moneycontrol that life insurers had sought permission to start selling reimbursement plans. Here, when an insured is hospitalised, the kin pays the bills. However, this is later reimbursed by the insurance companies on producing the medical bills.
“While general insurers and standalone health companies have more options as far as medical plans are concerned, we have a limited choice. We are seeking a change in this decision,” said the chief distribution officer of a mid-sized private life insurer.
Currently, life insurers are allowed to sell fixed-benefit health plans. This means that, if an individual is diagnosed with a particular ailment, the insurer will pay out a fixed sum for the treatment.
In 2016, the IRDAI asked to withdraw all indemnity-based health products being sold in the market. This product, popularly referred to as ‘mediclaim’, constituted almost 85-90 percent of the health products being sold by the life insurers.
While the IRDAI did not give any reason for this decision, the idea of the regulator was to let specialised non-life insurers to sell such products. Life insurers are of the view that this has taken away from the level-playing field that existed earlier.
“Globally, life and health come under one category. By not allowing us to sell indemnity plans, the current health plans become restrictive to customers,” said the chief executive of a private life insurer.
The IRDAI has not yet taken a decision on this matter.
If this proposal is approved, customers can choose to buy a product from either a life or a general insurer. After the regulation changed, individuals mostly chose to buy health products from non-life insurers since they provided more coverage, wider benefits at an attractive premium.
For instance, a typical fixed benefit plan of Rs 5 lakh will pay the amount as a lump sum benefit in case of an illness like a heart disease. After this payout, the policy ceases to exist.However, if an individual wants prolonged coverage for critical illnesses and wants to get away from the hassle of paying money at the hospitals for subsequent treatment, having an indemnity-based cover is beneficial since it will pay the exact hospitalisation expenses.