IRDAI Master Circular: Four changes benefitting policyholders

Insurance regulator IRDAI had come out with a Master Circular on May 29, 2024, which issued guidelines for health insurers. These are existing guidelines reiterated or are new and modified guidelines.

We highlight the four most important changes applicable to policyholders that can vastly improve the benefits from health insurance, compared to earlier.

All ages, PED and medical conditions

Insurers have to offer their policies to all ages, prospects with pre-existing disease (PED) and medical conditions. Encompassing every age, including senior citizens, had been introduced earlier in the year and has been reiterated in the current circular. Now, PED and medical conditions have been included to cast a wider net. Also, IRDAI earlier reduced PED waiting period to three years from four, and moratorium period, time after which a claim cannot be contested unless established fraud, to five years, from eight years.

Every new product offered after the circular has to provide insurance to everyone and with new waiting periods and is the biggest takeaway from the Master Circular. Though product availability increases for senior citizens, people with chronic conditions, or a combination of both, the underwriting process (pricing and offering an insurance cover), are still the domain of insurers. A lot more product evolution and market demand can meaningfully translate these changes to health insurance for all.

For existing policies, waiting periods must be complied with by October ‘24. This means that any new premium payment done after October should include a lower PED waiting and lower moratorium period, according to the Master Circular.

Claim settlement

The Master cCrcular also has a series of guidelines on claim settlement which, if implemented, should vastly improve user experience. Firstly, reimbursement in cash to be considered only in extraordinary situations. Most hospitals must be on the insurer network list for a cashless claim settlement. This pushes the onus of ‘cashlessness’ to individual hospital management, even if the insurer is willing. The policyholder can apply for pre-authorisation if it is a non-network hospital to avoid paying from hand and applying for reimbursement later.

Further, insurers should decide on request for cashless authorisation within an hour and within three hours for discharge authorisation. Many policyholders would have waited for 6-7 hours for discharge. This is partly to be ascribed to hospital paperwork and partly to the insurer. Again, the onus for a quick turnaround time moves to hospitals and their ability to go paperless. But slowly and incrementally, cashless transaction processed at quick turnaround times should be expected.

In cases where policyholder has more than one health insurance (all parties informed of each other), the guidelines suggest that the policyholder can choose a primary insurer, who then has to coordinate with the other insurer for any amount higher than the primary coverage limit. This takes the onus of coordination away from policyholder to the primary insurer.

Customer information sheet

Policyholders were till now issued a policy document upon purchase. A customer information sheet or CIS to be issued along with policy document aims to demystify the legal-contractual language in simple words, elaborating on basic features — sum insured, summary of exclusions, sub-limits, waiting periods and deductibles.

Combined with a free look period of seven days, policyholder has the means to get any difference of opinion or expectations corrected or avoided at no extra cost. This is primarily to ensure that mis-selling doesn’t occur either by the policy agent or by marketing practices.

Other changes

More of an option to insurers than a guideline, insurers can now offer discount on not making any claims in a year. Earlier, discounts were not allowed and insurers generally offered No claim bonus as an addition to coverage. NCB bonus gained prominence and now one can easily double coverage amount within three-five years on not making a claim. With the additional option of a discount, it has to be seen how insurers upgrade their offering.

The guidelines now mention specific technological advancements to be covered which include MABs (monoclonal antibodies), robotic surgeries (gaining prominence in knee surgeries), and Stem cell therapy, amongst others, but not limited to them.

The guidelines also indicate that there can be no new underwriting unless the sum insured increases. This is more of a myth-busting than a guideline. Policyholders who are hesitant about declaring a condition after policy initiation now can do so without fearing an increase in premium as underwriting cannot be done again.

Advantage, policyholder

Siddharth Singhal, Business Head - Health Insurance, Policybazaar.com, feels the new guidelines are a positive for the insurance sector and the policyholder. Inclusion of all ages and medical conditions can widen the safety net of health insurance to the segment that benefits most from health insurance. He also adds that electronic medical records would push hospitals to go paperless, which will improve service quality for insurance sector. The National Health Claims Exchange, which is being developed, should play a major role in further accentuating such changes.