Boon for aging buyers

IRDA’s latest directive

In a directive issued last week,the Insurance Regulatory and Development Authority (IRDA) has directed that no general insurer will now be able to deny policy renewal on arbitrary grounds. “A health insurance policy shall be ordinarily renewable except on grounds such as fraud,moral hazard,or misrepresentation,” the circular said.

To ensure greater transparency,insurance companies have also been directed to provide detailed upfront disclosures about the terms of renewal. These should include the likely premium for future renewals of the policy and maximum age up to which renewal would be available.

Moreover,the regulator has also tried to rationalise the renewal period for all health covers. From June 1,all the policies must have a clause that condones delay in renewal for up to 15 days from the renewal due date. This simply means that you will be considered as continuously covered in terms of continuity benefits such as waiting period and coverage of pre-existing diseases during this period. Until now,failure to pay the premium by the renewal date meant lapsation of cover. In such a case,the insured had to get a fresh policy.

And lastly,companies have been directed to send a written note to the insured in case they are planning to hike premium rates. The note must clearly explain reasons for the hike and also how it is consistent with the loading structure provided earlier.

Likely consequences

Rise in premium rates. As norms become tighter for insurance companies,industry experts believe premium rates for health insurance will climb northward. “There is a possibility that companies could raise premium for certain age categories or high-risk individuals,” says Yashish Dhaiya,chief executive officer,PolicyBazaar.com,an insurance portal. He adds that the latest directive would,however,bring underwriting discipline to the industry. At present,health insurance premium is generally 1.5 to 2 per cent of the sum insured.

Stricter entry norms. There is also a possibility that entry norms could become more stringent. “Insurers that have been selling health insurance policies like a bus ticket,by only asking for a simple good-health declaration form,might have to reconsider their strategy. Since it would not be possible to offload customers on the basis of their high claim ratio,companies will have to conduct proper medical check-up and do more underwriting,” says an official at a state-run general insurance company.

Points to remember

Buy health cover at the earliest. While the regulator is doing its bit to ensure hassle-free services and utmost transparency,you too must do your part by buying a health cover at the earliest.

Besides lower premium rates,there are other positives to buying a policy at an early age. For every claim-free year,insurance companies bump up your sum insured (the amount of cover) by 5 per cent. While the bonus is added to the sum insured every year,the premium paid remains the same. You only have to pay the premium applicable to the relevant age group for the original sum insured.

Have sufficient cover. Sufficient amount of health insurance cover is crucial. With medical costs rising every year,people should calibrate their covers time and again. “People in metros should have at least Rs 5 lakh cover. The amount can be a bit lower for people in smaller cities,” says Rahul Aggarwal,chief executive officer,Optima Brokers.

Do not let the policy lapse. Always pay your premium on time. Failure to pay the premium within the stipulated time leads to a break in continuity. That means you will have to go through a fresh set of medical examinations and risk being denied a cover.

Finally,do not compromise on the quality of treatment available to you should an emergency arise. The only way you can ensure this is by getting yourself adequate health cover at the earliest. u

suneeti.ahuja@expressindia.com