Irda's latest rules impact health cover turfs

The Insurance Regulatory and Development Authority (Irda)’s guidelines on unit-linked insurance plans (Ulips) could make things a bit more difficult for general insurance companies (GICs).

Medical insurance, considered a general insurance turf till a few years earlier, is going to get more competitive. Irda’s new guidelines say Ulips other than pension plans have to mandatorily provide either a health cover or a mortality cover to policyholders.

Said the CEO of a GIC, “In the last three-four years, though life insurers have introduced quite a few medical plans, the focus was mainly on benefit plans. We will face stiff competition from them if they aggressively introduce indemnity plans.”

At present, non-life insurers mostly have indemnity plans – in which a policyholder has to produce bills to be reimbursed. Life insurers, on the other hand, aggressively push benefit plans, where a person is paid the entire amount when they are diagnosed with any disease. 

Irda’s new medical cover guidelines have specified that the cover per annum has to be a minimum of five times the annual premium or Rs 1 lakh, whichever is higher, for a person below 45 years. For policyholders above 45, it has to be a minimum of five times the annual premium or Rs 75,000, whichever is higher.

Life insurers are gearing to come up with plans having a medical insurance component. Interestingly, some life companies that have general insurance arms as well are planning to do it alone. “We will come out with our own products. Bundling medical cover with life cover is likely to help expand the market,” said the CEO of one of the largest life insurance companies.”

Medical insurance is a loss-making business for GICs and they feel things could get a bit tougher. The penetration of general insurance companies is a mere 0.7 per cent of the gross domestic product (GDP). In comparison, life insurers have a penetration of 4 per cent of GDP. And, the new rules will strengthen their position. “Though GICs are making losses, we feel a longer term product might make this business profitable,” said the CEO of a life insurance company.

The challenge, according to the CEO of a GIC, will be to create a Ulip product with medical cover that is able to factor in the rise in healthcare cost for a period of 10-15 years. “The reason medical insurance is a loss-making business and premiums have to be renewed every year is because of skyrocketing rise in healthcare costs. I wonder how life insurers will create a product that accounts for this,” added the CEO. Premiums, as a result, could be higher for plans which come with a medical insurance cover.