The Insurance Regulatory and Development Authority of India (IRDAI) wants insurance companies to focus on ensuring the necessary coverage for people seeking treatment for their emotional disorders or those afflicted with grievous disease like HIV/AIDS.
In a recent circular published by the IRDAI, general and independent health insurers have been ordered to provide special coverage for people with disabilities, chronic illness patients and those who need care for their mental health problems. The regulator has provided insurers with sample guidelines setting out the minimum scope and parameters for product design.
The insurers have been told to design and execute board-approved underwriting policies to ensure that applications from this category are not denied coverage. According to the regulatory framework, the contract term of the product is renewable for a year. The insurance regulator said, “It is reiterated that this circular should come into force with immediate effect.”
The general and independent health insurance companies with the necessary certificate of registration to conduct general and/or health insurance business are required to market and offer their respective products without delay.
Ironically, HIV and mental illnesses are already a part of many health insurance products. By October 31, 2022, the IRDAI had directed insurance companies to include mental health coverage in addition to covering most other illnesses. The fact that insurance companies showed no interest in complying with the earlier IRDAI circular prompted the regulator to issue another directive in this direction.
The lack of response or participation from the insurers also hinted at the very slow progress in effectively putting this system into place. To this effect, the circular added, “The insurers may widen the scope of this product but in no case can the scope of the product be narrowed down.”
The new circular seems more about ensuring and extending coverage to the vulnerable insured. Mahavir Chopra, Founder CEO, Beshak.org, said, “While earlier circulars talked about covering mental illnesses as well as not discriminating people with mental illness, it was still left to the insurers underwriting to approve or decline a specific proposal. Now, insurers have been mandated to not decline any proposal from such people, and offer them a product with a predefined scope. What remains to be seen is how it is finally offered and priced by insurers.”
Rahul Agarwal, Proprietor, Advent Financial, added, “After the previous circular, while the insurance companies had published a generic underwriting policy on their website for persons with disabilities, HIV/AIDS and mental illnesses, this was more to ‘comply’ with the IRDAI regulations. In practice, the scope and coverage in terms of benefits and amounts varied across insurers and insurers weren't exactly forthcoming in offering policies to persons with these conditions.”
Agarwal added, “It remains to be seen how proactively the insurers are in adhering to the latest circular and rolling out such policies. I am yet to see the model policy prescribed by the IRDAI and notwithstanding the contents thereof, based on the scope of coverage and benefits under the current policies, I would like to say that the coverage should be tailored to cover the kind of expenses likely to be incurred for these illnesses. For e.g. in the case of someone suffering from mental illness, hospitalisation might not be done but the person may be consulting a psychologist or psychiatrist. Generally speaking, insurers want absolutely healthy lives where the probability of claims is lower. So, I will be keenly watching the development in this space.”
Manju Dhake, VP- Insurance, 1finance, says, “When it comes to customer perspective, these additions are good to have, as it will widen the scope of coverages which includes people with such specified ailments. However, in a broader sense, health insurance has been a bleeding portfolio for insurers, with pandemic claims adding to that. Keeping this in mind, implementing the suggested changes would necessitate changes in the policy terms and conditions, board-approved underwriting policies within the regulatory framework, strengthening the claim procedure to cater to claims related to mental illnesses, and so on. This explains why insurance companies would require more time to build additional infrastructure to comply with the guidelines and develop additional guidelines regarding premium pricing, expense ratio, and so on. This is a good move from the standpoint of the customer and has inclusions. Though a lot of clarity on how the insurers will take this regulatory mandate forward in implementation is expected.”
Dev Ashish, Founder, Stable Investor, said it is good that the IRDAI is forcing insurers to act on this and will help cater to the growing demand for such coverages in the modern lifestyle of Indians. But it is to be seen how the mental health-related claims will be incorporated into the health insurance policies which are largely focused on hospitalization.
“Generally, most mental health-related issues are more about ongoing therapy and less about hospitalization. Another angle to be seen would be that of pre-existing mental health conditions. Will the regular norms of waiting periods still be applicable or insurers would take a lenient view here? The hope is that insurers will come out with useful offerings in this space and not just launch products to comply with the IRDAI push,” said Ashish.
Abhishek Poddar, CEO and Co-Founder, Plum, said that the move is a significant step towards building a more inclusive society.
"It is important for all insurers to have health insurance product covers for these individuals to address the significant gap in the insurance industry and ensure that vulnerable individuals can access the care and treatment they need. This is not just a regulatory change; it is an opportunity for insurers to demonstrate their commitment to inclusion, diversity, and social responsibility," said Poddar.
The insurance companies can decide how much they wish to charge on these policies which will be then a one-year contract like all health insurance policies.