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From June 2009 onwards, insurance companies in India cannot decline the renewals of the individual health insurance policies on the grounds of age, claims etc. and hence the right is passed on to policyholders. The circular of IRDA 52/15/IRDA/Health/SN/08-09 comes into effect from June 1, 2009. This becomes applicable for all the policies issued or renewed from this date. This is certainly good news for the senior citizens who kept their faith over the health insurance and this also will solve many cases pending before the judiciary due to renewal disputes. It should be noted here that the insurers cannot decline the renewals, but they can increase the premiums if they have already stated in their prospectus at the time of taking policy about the details of specific circumstances where the premium could be loaded (or discount withdrawn) by the insurer, as also the extent to which it would be done.

Another clause mentions that “An insurer shall not compel any insured covered under a specific health insurance product to shift to another health insurance product except in cases where a specific product is being upgraded or discontinued with the approval of the Authority. This leaves IRDA to play a critical role as the clause allowing the insured to shift to another product is quite ambiguous. A product can be upgraded and can make the people ineligible for the specific product if the claims experience in a specific product is very high. Hence up gradation should be allowed only with the new product code.

It must also be noted that the employees who enjoy the group health insurance coverages will not fall under this renewable guarantee for their Group coverages which means that their premium & insurance can go for a toss. Health insurance has seen a dip. Health insurance, a key driver of growth in the non-life business, has slowed down sharply in the first quarter of the current fiscal (FY10). Growth in premium income from health insurance has decelerated to 2.6 percent against 23 percent growth in the year-ago quarter. There is a swap in the ratio of Group health to individual health which contributes only 35% currently, 5 years ago, Group contributed around 70%. This is mainly because the corporate are under pressure to reduce the expenses and opt for lower premium and cover.

But IRDA has specified that group health insurance scheme providers should disclose the continuity conditions. In the last few years after de-tariffication, group health lost the cross-subsidized premium rates it enjoyed during tariff regime. Due to recession impacts, many of the employers have reduced the group coverage for their employees as part of cost reduction exercise thus leaving them with reduced coverage. This leaves a gap and both regulator and insurer should take steps to convert the group policy underinsurance into individual policies so that enough coverage exists for employees. While HR of each employer should take steps to do propaganda of ‘Disclosure on continuity’, IRDA should also mandate the TPAs who normally coordinate with HR of corporate, to spread the messages to improve the penetration.

Rough estimate shows that last year there is growth of 30% of Health Insurance premium revenue but this cannot be construed as the Spread of Health Insurance as this may be due to increase in premium rates, Sec. 80D benefits etc. Given the fact of current economic scenario & increasing incidence of diseases, one should realize that it will require more than one type of coverage to manage a claim. Only Increased participation will encourage the regulator and insurers to find out definite methods as each renewal can add up to different scenarios and this will lead to standardization of methods and processes in the long run.

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The author is a a Chartered Accountant & Cost Accountant and can be reached at ca.bharathy@gmail.com, views are personal.