Benefit-based Covid product to be priced higher than the indemnity one

The insurance regulator has revised its guidelines around the standard cover for the third time

In a fresh set of guidelines, the insurance regulator has asked general and health insurers to offer two products specifically for Covid-19 by July 15. One will be an indemnity-based product (Covid-19 standard health policy) and the other one will be benefit based product (Covid-19 standard benefit-based policy).

While the policy wordings and the benefits received will be uniform across all insurers, the pricing of the product has been left to the insurers. Experts say, the standard product will be cheaper than other comprehensive health products and the benefit based Covid product will be priced higher than the indemnity product.

“The benefit based Covid product will have a higher premium than the indemnity based product at the same sum insured”, said Sanjay Datta, Chief–Underwriting & Claims, ICICI Lombard. “The logic behind two products is: let’s say, if anyone has normal health product then they can take the benefit based product and on testing positive, one will get a lump sum amount. Benefit based product can be taken as a supplementary product. But, if you do not have a product, then opting for the indemnity based product makes sense”, he added.

Earlier, the regulator had toyed with idea of an indemnity-based product from June 15 specifically for Covid-19 but later the guidelines and asked insurers to offer a benefit-based product instead for Covid-19 by June 30.

Now, in the new guidelines that the regulator has come up with, the standard health policy for Covid-19 will come with a base cover which is indemnity based and an optional cover, which will be benefit based. And, it will be offered for a policy tenure of three months, six months, and one year with a maximum sum assured of Rs 5 lakh and the minimum being Rs 50,000.

The base cover will take care of the hospitalization expense incurred by the person for the treatment of Covid on positive diagnosis through a government approved diagnostic center. The base cover will not have a ceiling on the room expense, ICU expenses and will cover the cost of PPE kits, masks, and other such similar expenses. But the ambulance cost has been kept at a maximum of Rs 2,000. The base cover is also supposed to take care of home care expenses if the insured person is advised by medical practitioners to undergo treatment at home.

The optional cover will pay 0.5 per cent of the sum assured insured per day for each 24 hours of continuous hospitalisation for treatment of Covid-19 following an admissible hospitalisation claim under the policy. And, the benefit shall be payable maximum up to 15 days during a policy period in respect of every insured person.

As far as the Covid-19 standard benefit based policy is concerned, a lump sum benefit equal to 100 per cent of the sum Insured shall be payable on positive diagnosis of Covid-19, requiring hospitalisation for a minimum period of three continuous days. The policy will have a minimum sum assured of Rs 50,000 and maximum of Rs 3 lakh. And the policy shall be offered with a policy term of three months, six months and one year.

“Pricing is a function of risk. The benefit product will be slightly expensive than the indemnity product because one will get the full sum insured whereas in indemnity, it is not necessary that a policyholder will get the full sum insured. And, the standard Covid product will definitely be cheaper than the traditional health product”, said the chief executive of a private non-life insurer. “Customers can choose to take both the indemnity and the benefit-based products but it will depend on the individual companies if they want to put restrictions”, he added.

“Ideally, it should be cheaper than Aarogya Sanjeevani policy and the indemnity product will be priced cheaper than the benefit based product, said Amit Chhabra, Business Head–Health, Policybazaar.

Pricing is the prerogative of the insurance companies but generally pricing is done based on the historical performance of the insurer and the loss ratios in the particular segment. And it will also depend on their assessment of the current situation, he added.

What the two products are offering: 

Covid-19 Standard Health Policy

• Indemnity based cover along with benefit based optional cover

• Hospitalisation expenses and home care expense to be covered 

• Pre-hospitalisation expenses of 15 days and post-hospitalisation expenses of 30 days to be covered 

• No deductibles permitted 

• Minimum sum assured of Rs 50,000 and maximum Rs 5 lakh

Covid-19 standard benefit-based health policy 

• 100% sum assured to be paid on positive diagnosis and hospitalization 

• Maximum sum assured of Rs 3 lakh

• Policy will be offered for 3 months, 6 months, and 1 year