The Insurance Regulatory and Development Authority of India (Irdai) is said to have withdrawn the draft guidelines it issued on a standard covid-19 health insurance product earlier this month and has instead proposed a benefit-based product to address the insurance needs relating to the coronavirus infection. Mint has a copy of the new draft guidelines.
Early in June, Irdai sent draft guidelines for a standard covid-19 health insurance product to all general and stand-alone health insurance companies. It was a one-year indemnity policy with the option of only two add-ons. Insurers were asked to offer the product starting 15 June. Mint reviewed the draft guidelines and found that it was of little use. You can read more about it here and here.
According to the new draft guidelines, the minimum sum insured under this policy would be ₹50,000. You can opt for a sum insured in multiples of ₹50,000, up to ₹5 lakh.
What is the product?
The proposed product shall be called “Covid-19 standard individual benefit-based health policy" followed by the name of the insurance company.
It is a one-year benefit-based product. In other words, it will pay a lump sum benefit equal to 100% of the sum insured to the policyholder if he or she tests positive for covid-19 and is advised hospitalization.
Say, you buy this policy with a sum insured of ₹3 lakh, then on hospitalization for covid-19, you will get a lump sum payout of ₹3 lakh. In case your hospital bill is more than the sum insured, you’ll have to bear the spillover. The diagnosis has to be confirmed by an authorized center as declared by the ministry of health and family welfare.
The policy can be bought for an individual or on a family-floater basis. The minimum entry age shall be 18 years and the maximum 65. Dependant children shall be covered from the age of three months to 25 years.
The product provides one add-on: a quarantine cover. According to the guidelines, if the insured person is quarantined due to suspected infection, then 50% of the base sum insured shall be payable.
Also, if the policyholder is diagnosed with covid-19 after the settlement of the add-on benefit, then he or she will be eligible only for the balance amount of the total policy benefit.
Will it benefit you?
Insurers we spoke with aren’t convinced with the product and believe that since the number of infections is only spiking, a benefit-based policy could come at a high cost. The question still remains the same. If a regular health insurance policy is covering the costs for covid-19, why is there a need for a separate policy?
"The guidelines have been rolled out due to the fear around covid-19 but my view is that this product still does not address the real issues around the cost of treatment," said Prasun Sikdar, managing director and chief executive officer, ManipalCigna Health Insurance Co. Ltd.
Insurers said the reason why disease-specific policies haven’t done well in the past is because most illnesses are covered under a regular indemnity policy.
However, Sikdar said this product is still better compared to the covid-19-specific indemnity policy that was proposed earlier. Bhabatosh Mishra, director, underwriting, products and claims, Max Bupa Health Insurance Co. Ltd, said, if necessary, Irdai should’ve just asked insurers to offer a covid-19 benefit-based rider with regular health insurance policies and the recently launched Arogya Sanjeevani product.
“From a policyholder perspective, I don’t think this product caters to the problem of high treatment costs. Arogya Sanjeevani is a way better product because it caters to all the problems at large. It is affordable and will also ensure that health insurance penetration increases because unlike a benefit-based policy, people will want to renew it every year," he said.
Insurers said since the community spread of covid-19 is already happening, launching such a policy now will only push the pricing upwards. Note that the regulator has left the pricing to the insurers. “Unless insurance companies are able to ride on large numbers, you will not see a benefit in premiums," said Sikdar.
Insurers also worry about covering individuals with co-morbid conditions because such people have higher chances of contracting the infection given that their immunity is relatively low. Sikdar said some amount of underwriting will be required to deal with this.
"The other concern is about someone who has recovered from covid-19. The clarification is also sought from the regulator on the applicability of pre-existing disease waiting period," added Sikdar. Insurers said it is still unclear if there is a 48-month waiting period.
The cap on sum insured, too, could become a problem, said Mishra. “If the cost of treatment continues to be as high as it is right now, a ₹5 lakh cover may not really help the policyholder. The minimum of ₹50,000 sum insured doesn’t do anything because the average cost of treatment is ₹2 lakh-2.5 lakh."
Mishra added that a gap of ₹50,000 in the sum insured will not impact premiums to a great extent.
Mint take
While insurers are still sending in their feedback and seeking clarifications, this product shall help policyholders to a great extent compared to the previously proposed covid-19-specific indemnity policy, as it removes confusion in terms of what is covered and what isn’t. Right now, policyholders are suffering because of inflated hospital bills and insurers not covering costs of consumables such as PPE kits.
The fact that it is defined-benefit policy means you don’t have to deal with the arbitrariness between the insurer and the hospitals. However, for individuals with co-morbidity, it’s advisable to wait and watch to understand how insurers will underwrite the product as they’d want to lower their risk exposure as well.
The pricing too is something that will play a big role in understanding whether the policy really makes sense or not. For now, if you have adequate health insurance cover, there’s not too much to worry because you are covered for covid-19 treatment.
Insurers have been asked to compulsorily offer this product starting 30 June but experts we spoke with said that it’s a very close deadline and may not work out given that they have another deadline to meet by the end of September—for standardization of exclusions for existing health policies. Watch this space!
