IRDA may have strict rules for life insurers on health cover

Life Insurance companies may soon get permission to offer indemnity-based health insurance products but such permission would be with stringent conditions that would not allow these insurers to take away any sizeable market from stand-alone health insurance companies that are still struggling to grow their businesses, two sources privy to the development said.

The Insurance Regulatory and Development Authority of India (IRDAI) last month set up a committee to study the feasibility of allowing life insurers to offer indemnity-based health insurance policies and come with its report in two months.

The sources quoted earlier said that though the committee may recommend such flexibility for Life Insurers, it would come with conditions that directly did not interfere with products currently being offered by general insurers including stand-alone health insurance companies.

Though the nature of restrictions is still to be discussed, sources said that one issue that is before the committee is to allow life insurers to offer indemnity health cover only as an add-on feature of their life cover and reimburse actual expenses of medical bills of the customers only for specific diseases covered under the plan.

At present, life insurers are only allowed to offer fixed benefit health plans to the customers meaning a fixed amount is paid on contraction of identified disease. They are not allowed to sell indemnity-based health plans which indemnifies the policyholder against hospitalisation expenses up to the total sum insured. This plan is sole prerogative of general insurers or stand-alone health insurance companies. Till about 2016, life insurers could sell such health plans as well before it was banned by IRDA.

"Life insurers are already big market players and they should not be allowed to sell health products that would put a big dent on revenues of general insurers. Health market in India is still growing and regulations should not be changed at this juncture. We will strongly oppose any move by the regulator to make changes in regulations," said a senior executive of Oriental Insurance Company Ltd who is also part of union representing public sector insurers.

The permission to sell health insurance products by life insurance companies would allow entry of another 24 entities in the fray. But this would bad for general insurers as latest data suggest that stand-alone health insurers have managed just about Rs 10,600 crore premium income in FY19 even though the insurance spending by the middle class has increased.

The idea behind exploring re-entry of Life insurers into health insurance is to bring their expertise in long term pricing modelling to offer products (term plans) that offer even health coverage for a longer-term. Moreover, the customers will also have the prerogative of buying their life and health insurance from the same insurer. IANS