The Insurance Regulatory and Development Authority of India (IRDAI), issued three new guidelines in June 2020 to insurers offering health insurance products. These guidelines require insurers to make three changes in their policies and functioning to make health insurance more consumer-friendly. These changes are:
1. Standardisation of important product clauses in their policies so that customers can understand them easily and can compare products across insurers.
2. Ensuring insurance coverage for telemedicine, which is important in these times of physical distancing.
3. To provide more rational and customer-friendly claim deductions.
The first set of guidelines asks insurers to standardise the general terms and clauses in their indemnity-based health insurance policy contracts.
These standardised clauses are to be incorporated in the new products filed by insurers on or after October 1, 2020, and for existing products which are due for renewal from April 1, 2021. Insurers have been asked to use the prescribed standard wordings provided by IRDAI. Additional terms and clauses are allowed to be used to ensure a more informed choice to insurance prospects.
The standard terms and clauses mentioned cover many important items in the policy documentation, such as the material facts that are required to be disclosed by the insured at the time of policy issuance, terms and conditions required to be met by the insured for settlement of a claim, and other helpful items including those about policy cancellation, migration, porting, renewal and redressal of grievances. This standardisation and simplification will help to create better customer understanding of product offerings across insurers.
The second set of guidelines is on telemedicine. Since the Medical Council of India has issued guidelines in March 2020 enabling Registered Medical Practitioners to provide healthcare using telemedicine, insurers have been advised to allow claim settlement for telemedicine consultation wherever normal consultation with a medical practitioner is allowed in the terms and conditions of the policy contract.
The third set of guidelines is regarding norms on proportionate deductions in claims. This is useful for policy buyers who choose a higher category of hospital room than what is allowed by the capping on their insurance policy.
Let us say you have a Rs 5 lakh health insurance policy with a 1 per cent daily room rent capping. The maximum hospital room tariff that you are thus eligible for is Rs 5,000 per day. However, if you choose to occupy a room costing Rs 7,000 for your treatment (which is 40 per cent higher than your room rent capping), your insurer would typically deduct 40 per cent from your total claim, including room charges and other charges, which are often called associate medical expenses. This is because hospitals typically increase the billing on all your other chargeable items. For instance, increase in doctors’ consultation fees in proportion to the increase in your room tariff.
However, the new guidelines call for ‘associate medical expenses’ to be clearly defined in the policy contract, and disallows the costs of pharmacy and consumables, implants and medical devices, and diagnostics, to be considered in this category. Insurers are not to recover expenses towards proportionate deductions other than the defined ‘associate medical expenses’ while processing claims. Hence, the total deductions made on your claim will reduce, which is in your favour.
There are two further benefits for policyholders. Insurers are to ensure that proportionate deductions are not applied in respect of hospitals which do not follow differential billing, or for expenses where differential billing based on the room category are not followed. Finally, insurers are not permitted to apply proportionate deduction for ICU charges, as there usually aren’t different categories of ICUs.
Here too, the provisions of these guidelines shall apply to new health insurance products filed on or after October 1, 2020, while for existing health insurance products the modifications can be made with their renewal from April 1, 2021.
(The writer is Executive Director at SecureNow.in)