IRDA wants you to focus on health, worry less about claims

Arbitrary premium hikes and claim processing delays could soon be a thing of past, with the Insurance Regulatory and Development Authority (Irda) finalising norms on health insurance to address these issues. These directives, which will come into effect from October 1, are expected to change many practices in the health insurance space.

Some of the guidelines, like mandatory lifetime renewal and minimum entry age limit of 65 years, are already in place. However, a few new ones like prohibiting insurers from hiking renewal premiums simply because of a claim made in the previous year will definitely help many policyholders. Claim-based loading — an industry practice where renewal premiums are hiked when you make claims — is often a cause of heartburn for policyholders.

After October 1, insurers will not be allowed to load premiums arbitrarily — they will have to base it on preceding three years’ claims experience as also expected claims experience. The reasoning behind proposed pricing will have to be justified.

“Loading will apply only when individual claims experience for three consecutive years is 500% of current year premium. So, the insurance company can apply loading only, if say, the current year premium is . 15,000 and claims for three consecutive years amount to over . 75,000,” explains Mahavir Chopra, head of personal lines and e-business with health insurance consultancy firm medimanage.com.

Also, you will be informed about any change in premium or renewal terms three months in advance. “The ‘Delayed claim settlement to attract interest’ clause will have to be added to policy document. Also, insurers cannot reject claims without a proper medical reason,” says activist Gaurang Damani, who had filed a petition in the Bombay High Court that led to Irda to formulating health insurance guidelines. Policyholders exasperated with third party administrators’ functioning can also expect some relief.

The insurance company, and not the TPA, will now have to take on the responsibility of settling or rejecting the claim. “TPA cannot settle claims, but only process claim. This will have a great impact, as only insurance companies can settle claims now. In cases where third-party administrators (TPA) issued cheques for claims, often, payments used to get delayed. Also, it was difficult to ascertain whether the TPA had handed over the entire claim amount approved by the insurer to the policyholder,” says Damani.

This apart, the regulator has also sought to standardise definitions of certain terms, critical illnesses and exclusion among other things. “Policyholders will surely benefit due to the reduction in ambiguity of the various terms used by the different insurers leading to fewer disputes between them and the insurers. It also educates customers and reduces chances of their being taken for a ride by unscrupulous health care providers ,” says Amarnath Ananthanarayan , CEO & MD, Bharti-AXA General Insurance.

Standardisation of norms

Given the voluminous policy documents and complicated language that policyholders have to deal with, it is hardly surprising that very few go through them. Besides, due to the ambiguity , clauses are open to interpretation , resulting in disputes.

Therefore , Irda has come up with standard definitions for certain terms. “The standard definition has been prescribed for the 45 most common terms used in health insurance — such as day care treatment, hospital, inpatient care, pre-existing disease etc — that will help in reducing different interpretation by various stakeholders ,” says Antony Jacob, CEO, Apollo Munich.

Henceforth, all insurers will have to stick to these definitions in their policy documents. Irda has also defined 11 critical illnesses that are covered under various policies. “Defining critical illnesses will reduce disappointment at the claims stage on the coverage norms and exclusions under each critical illness. This should certainly avoid confusion among consumers and industry,” says Ramesh Ramani, senior vice-president , consumer lines, Tata-AIG General.

Common list of exclusions

As one of the chief causes for disputes is exclusions, the insurance regulator has finalised a list of expenses the insurance companies need not pay for. “The standardisation will reduce the disputes between the customers and the industry companies with respect to what is covered under an insurance policy, and therefore, payable as a claim,” says Ananthanarayan.

Irda has put out a list of 199 items and has indicated whether they are admissible or not. “The interpretation of the excluded items has been different at every stage by every stakeholder . Standardising the interpretation will ensure clarity. Policy coverage hasn’t been defined and has been left to the insurers. If the insurers wish to include these as part of the hospitalisation expenses in their product design , they are free to do so,” adds Ramani.

Uniform claim forms

Yet another step towards eliminating confusion, this measure could come to the aid of policyholders at the most critical stage — at the time of making claims. “Standard pre-authorisation (for cashless claims) and claim form will significantly streamline processes at every stage. By implementing it in an optical character recognition (OCR) format, the ability to transfer data from a handwritten paper-based form to IT systems has been enhanced , thus reducing data entry issues for TPAs and insurers. This will help in reducing the turnaround time and hence result in swifter claim settlements,” says Jacob.