Consider this: You are part of a group of fitness freaks, all in their mid-forties. Despite perfect health parameters, your premiums are higher than those for a 35-year-old with no fitness regimes and facing the risk of obesity-related ailments in the future. Think it’s unfair? A solution could be on its way, as early as next month. Such policyholders might be able to collectively buy a cost-effective group cover, provided they demonstrate the desired fitness levels.
The Insurance Regulatory and Development Authority of India (IRDAI) has approved 30 non-life products under the Regulatory Sandbox framework. Prospective policyholders will be able to buy products with features that regular policies don’t offer during a six-month testing period.
In August last year, the IRDAI had issued regulatory sandbox guidelines, inviting insurers to send in proposals with features not permitted under the existing regulatory framework. It defines regulatory sandbox as the environment that provides a testing ground for new business models, processes and applications that “may not necessarily be covered fully by or are not fully compliant with existing regulations.” Put simply, the purpose is to allow experiments to test viability and acceptability of novel products.
Subsequently, 173 proposals were received, out of which IRDAI approved 33 health and motor insurance proposals. Thirty of these are products that will be offered to customers for a six-month period from February 1 to July 31, 2020.
“The approvals state that the products can be sold to a maximum of 10,000 customers. The pricing will be determined by insurers. They will, however, have to make it clear to policyholders that these products will come with a limited tenure and are not renewable for life, unlike regular health policies,” says Ashutosh Shrotriya, Head-Products and Business Processes, Religare Health Insurance. The regulator could grant an extension if the insurer can provide justifiable reasons, along with a performance analysis of the proposal. Once the extension period ends, the product will be back in the regulator’s court, which will then determine the further course of action.
Currently, group covers are offered to employees of firms, credit cardholders, home loan borrowers and so on. Regulations do not allow prospective policyholders to form a group specifically for buying insurance policies. Under the regulatory sandbox framework, however, three insurers – Max Bupa, Kotak Mahindra General Insurance and Religare Health – have proposed products that are exempted from this rule. For example, a like-minded group – say seven marathon runners – that feels it is healthier than others could come together to buy such a cover. “The benefit could be partial refund of premiums paid in case there are no claims. The hypothesis is that there will be no misrepresentation. They will also have a shared interest in ensuring that all members stay healthy,” explains Shrotriya.
App-monitored Wellness Programmes
IRDAI has allowed ICICI Lombard to offer a Diabetes Mellitus wellness programme. The idea is to enrol diabetics, subject to the insurer’s eligibility criteria, into the programme. “This will involve active management of diabetes. Their blood sugar levels will be monitored regularly to see how they manage their condition,” explains Sanjay Datta, Head, Claims, Underwriting and Reinsurance, ICICI Lombard. There could rewards or discounts on premiums if they successfully manage to improve their health parameters. Bajaj Allianz will launch a product that could bring down the insured’s claim burden. “Under the co-pay model, we are associating with GOQii, wherein based on the engagement level of insured on the health platform offered by GOQii the percentage of their co-pay will be decided,” says Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance. Those suffering from lifestyle diseases can hope to obtain health covers at affordable prices by following the diet and exercise regimen prescribed.
OPD with rewards programme
While a health insurance policy’s primary aim is to reimburse hospitalisation expenses, there has been a demand for a mechanism to fund doctor’s consultation and pharmacy bills too. Some insurers have created structures to offer this benefit, but a cost-effective, workable outpatient department (OPD) reimbursement scheme remains elusive. This could change if the Religare Health’s OPD pilot product takes off. That is, if you exercise for say three days a week, you will get a voucher at the end of the week. “You will not have to wait until next year to set-off reward points against the renewal premium. It will offer instant gratification, unlike products being offered so far. This will act as an incentive for policyholders to complete the quota of exercises every week,” explains Shrotriya.
Pay as you use
An oft-discussed mechanism, ‘pay as you use’ could finally turn into reality in India. At present, the premium for the motor own damage component is determined by the age, make and model of the vehicle. “A pay-as-you-consume model will help us change this and charge premiums based on kilometres utilised by the insured,” says Singhel. It could also be linked to the amount of time they intend to drive the car. “This will encourage more people to opt for own damage cover since majority of the vehicles only have the mandatory third-party liability cover,” he adds.
Other companies that propose to introduce such covers include ICICI Lombard, Tata-AIG General, Liberty General and Go Digit, among others. “The premiums will be linked to the driver’s rating, which, in turn, will be based on data on the insured’s driving patterns,” says Datta. The usage data could be tracked either by installing a device in the car or through a mobile app. To buy such products, either the insurance company will approach you or you could dial them to obtain more details.
Three insurers – ICICI Lombard, Reliance General and Edelweiss General – have received approvals for motor floater proposals. “The policy will cover all risks for all vehicles and the cover can be switched on/off as per the requirement of the customer with the flexibility of adding and deleting vehicles as required,” explains Shanai Ghosh, CEO and Executive Director, Edelweiss General Insurance. In other words, you can choose the vehicle to be insured, via an app, every time you use it. This will mean lower premiums for policyholders who own more than one vehicle.
Once the products are rolled out, prospective policyholders should buy the products that fulfil their requirements. Being pilot products, they will not entail long-term commitment. A robust process of experimentation will pave the way for products with useful features in the future. However, do not treat these as key components of your protection portfolio – these will cease to exist if companies find them unviable or IRDAI denies permission to offer them commercially in future.