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Industry sees proposed changes in insurance products consumer friendly, competitive
Nov 22, 2018
The proposed changes in various insurance products will be consumer-friendly and provide a flexibility to insurers in offering better services, industry experts say. The Insurance Regulatory and Development Authority of India (Irdai) in a draft guideline for insurance linked and non-linked products late last month has proposed changes in norms for various insurance products, including those related with payment to nominees in case of death of policy holders.
The minimum death benefit has been made 7 times for regular premium products and 1.25 times for single premium products for all ages, Irdai has proposed in the draft exposure. “The current limit for life cover for 45 years and low is ten times the annual income and for those above 45 years is seven times their annual income; the proposal is to make it seven for everybody. “Though there is no clarity on the tax benefit yet but the new proposal will most likely be available under section 80C of the Income Tax Act, as only then it will be in favour of the consumer. It will make sense for people to buy it only if it is covered under tax,” said Santosh Agarwal, Associate Director and Cluster Head- Life Insurance, Policybazaar.com.
Canara HSBC Oriental Bank of Commerce Life Insurance MD & CEO Anuj Mathur said the exposure draft of the new product regulations was long awaited by the industry, to review and revamp the 5-year old guidelines. “The key theme appears to be to simplify the regulations, and provide more flexibility to customers to meet their financial needs through insurance products. At the same time, the regulations encourage innovation and nudge the industry towards offering better value to customers through product design,” Mathur said.
Among others, Irdai has proposed non-linked policies to acquire guaranteed surrender value after 2 years; extension of revival period for a policy to 5 years from 2 years at present for non-linked products; option of commutation up to 60 per cent in pension products as well as settlement option period can be extended till 10 years or original policy term whichever is lower.
“We believe that savings products should focus on maximising savings and are not the right products to address the protection gap. In the draft proposal, the regulator has rightly reduced the minimum sum assured requirement from 10 times to 7 times the annual premium,” said Vighnesh Shahane, CEO and Whole Time Director, IDBI Federal Life Insurance.
Further, the proposal to allow customers to have the option to reduce premiums after 5 years for linked products up to 50 per cent as per their needs is welcomed, as it will help to keep the policy alive and boost persistency, he said. “We also feel that the proposed norms on pension products are encouraging. It allows up to 60 per cent of the accumulated corpus to be commuted. It is also beneficial for the customer as he has a choice of open-market options, allowing him to choose the annuity provider,” Shahane said.
The proposed changes, if implemented, will expectedly make life insurance product structures more flexible as well as customer friendly – such as increase in revival period, reduction in nil surrender value period from three to two years, longer settlement period, allowance for fund switches; and other flexibilities in term of product structures, said Vivek Jalan, Head, Insurance Consulting and Technology, Willis Towers Watson, India.
On the proposal for a partial withdrawals in case of linked pension plans, Agarwal of Policybazaar.com said that by this the regulator most likely mean the money can be allowed to be withdrawn in dire need, like in certain events of critical illness, disability or an accident or any other health issues for which the policyholder would want to withdraw the corpus for survival.
“So, flexibility of withdrawing money at key incidents will be helpful for the policyholders,” Agarwal said. The proposed changes also provides for insurers to design individual term, group term and credit and micro insurance products, among others. Allowing insurers more flexibility around creation of both retail and group products means faster turnaround time and adjusting to market scenarios better, said Agarwal. He also said that suggestion to allow policyholders to buy annuities from any insurer will further competition among insurance companies as they will not want to lose customers and will be compelled to provide better interest rates.
Currently, the policyholder has to annuitize their pension income from the same insurer at the interest rate that they have to offer. Irdai had constituted a ‘Committee on Review of Product Regulations Life’ for reviewing the 2013 regulations on linked insurance products and non-linked insurance products. The panel was set up as there have been significant changes in the trends in product structures driven by the customers’ needs, wants and preferences since 2013.Source: Hindustan Times
Regulator studies allowing more flexible motor products
Nov 20, 2018
The IRDAI has set up a working group to look into allowing modifications of the motor insurance product structure.
Not only is the insurance regulator looking to allow short-term duration products, but it may also permit technology-led solutions for dynamic pricing and better services, reports Moneycontrol.
Trial-based technology products could be allowed. Telematics or tracking devices will be a key component of the policy.
In motor own damage insurance, insurers suffer from the inability to launch innovative product features or tweak the policy duration. Any additional cover requires the insured to purchase 'add-ons' by paying more premium. These include engine protection, no-claim bonus, roadside assistance as well as zero depreciation cover. Other markets have these as a part of the core policy.
Similarly, co-ownership of cars is being considered globally. Once this is operational, multiple parties could be responsible for the car's insurance. How this will work out in the Indian market will be crucial, considering that vehicle theft rates are high in the country.
Source : Asia Insurance Review.
Kerala floods to have limited impact on strength of rated non-life insurers
Nov 09, 2018
Flooding in the southern Indian state of Kerala is not expected to have a significant impact on the balance sheet strength of rated Indian non-life insurers, says A.M. Best.
However, the losses may add to the unfavourable underwriting performance that the international credit agency has flagged as a negative rating factor for some of these insurers, says a new Best’s Briefing, titled, “Kerala Floods: Limited Impact on Rated Insurers’ Capital, May Add to Performance Issues”.
A.M. Best notes that Kerala represents a significantly smaller portion of the Indian non-life market and the international credit agency rated insurers’ overall gross premiums. Additionally, insurance penetration in India is low and insurance penetration in Kerala is estimated to be below the national average.
The cumulative rainfall this year during the 2018 summer monsoon period in Kerala was significantly higher than normal, and together with the release of waters from dams, created severe flooding in the region.
A.M. Best expects fire and motor to be the most impacted lines of business. Motor own damage is one of the leading sources of business, accounting for 30% of gross premiums in the state. Four large insurers, which wrote an estimated 70% of Kerala’s gross non-life premiums in 2017, are likely to absorb the majority of claims. The affected insurers rated by A.M. Best are expected to have adequate reinsurance protection, with deductibles that are small percentages of their premium base and capital sizes.
A.M. Best will continue to closely monitor developments at its rated insurers as more information becomes available on the ultimate gross and net impact of the floods on their profitability.
Source : Asia Insurance Review
Insurers confused about what constitutes mental illness
Nov 01, 2018
Insurers in India are at different stages in their preparations to provide coverage to those who are mentally ill.
One of the reasons for this situation is confusion among insurers over the definition of the term “mental illness” in the Mental Healthcare Act 2017, which became effective in May 2018.
Mr Mayank Bathwal, CEO of Aditya Birla Health Insurance Company (ABHIC) told Firstpost that it is easier to chalk out policies for in-patient facilities (which include hospitalisation) because of already available data and existing clarity on benefits for customers; but for mental health care, there is work that needs to be done in terms of understanding the range of issues or the benefits that insurers need to provide.
“We are now reviewing the process. Mental health is a fairly vast area,” he said.
Mr Bathwalsaid that ABHIC is looking at how to provide mental healthcare benefits and is in touch with the IRDAI to seek clarification wherever required. "We will offer these benefits at the right time,” he said.
He added, “We also need to be very clear about what mental health is. Our products already cover some of these lifestyle conditions, and when our health coaches have interactions with our customers, the top areas they talk about is how to deal with stress, etc. So, in some sense, we’re already providing some of these benefits and we’re doing some of these interactions with our existing customers. How you take it forward in terms of OPD expenses or hospitalisation expenses are areas that will evolve.”
ICICI Lombard, on the other hand, is ready to cover mental illness in line with an IRDAI's directive. In an emailed response, Mr Sanjay Datta, chief–underwriting, claims, reinsurance and actuarial, at ICICI Lombard, said, “Our existing policy will cover mental illness in the same manner as physical illness as per policy terms and conditions.”
Mr Ashish Mehrotra, MD & CEO of Max Bupa Health Insurance, in an article in Financial Express, pointed out that the National Mental Health Survey 2016 estimated that about 150m adult Indians, or 15% of India’s population suffered from mental health problems. Those between 30-49—a productive age group in the workforce—were among the most affected.
“Without the availability of insurance, patients have had to cover the entire cost of treatment out of pocket. This has proved a major deterrent, due to which an estimated 80% of patients do not seek or receive any treatment,” Mr Mehrotra said.
Immediate effect
Following the passage of the Mental Healthcare Act 2017 in May 2018, the IRDAI issued a circular in August directing health insurance providers to cover mental health problems as part of their policies with immediate effect. At that time, there was not a single policy in the market which covered mental healthcare.
Mr Bathwal said, ”While the policies, document, terms and conditions have not changed yet—because they have to be filed with the regulator— the circular meant that insurers, despite not having made changes to terms and conditions, will have to start offering those benefits. All these insurers have to go back and refile their terms and conditions because the document which is currently written for most of them will have a clause which says that anything to do with schizophrenia, Alzheimer’s are excluded. Technically, they’ll have to erase this sentence. That has not happened because it’s a long drawn process. Most insurers are in that process.”
While the Act implies that everybody is deemed covered for mental health problems, how the insurers cover their customers also depends on how they interpret the IRDAI circular.
Mr Vaidyanathan Ramani, product and innovation head at Policybazaar.com, said, “Different insurers can interpret it in different ways. For example, today, there are health insurance policies which cover you typically only if you’ve been admitted to hospital for more than 24 hours. If you have not, then there are special lists under which the coverage is allowed, like daycare procedures. One quick interpretation of the IRDAI circular is that an insurer will also cover mental health insurance the same way."
Mr Ramani’s understanding is that there is an informal committee constituted by insurance companies which is looking into defining mental illness and standardising the procedures.
Insurers and the IRDAI have a lot of ground to cover, including deciding on procedures to be followed, terms and conditions in insurance policies, evaluation parameters to be used to screen patients, and the premium at which mental healthcare can be covered.
Source: Asia Insurance Review
How to address the limitations of health insurance
Oct 31, 2018
A core principle, that I have been taught, in building a career is to always provide solutions when asked a question. Many years ago, in my first job at an FMCG company, my boss and I would travel into the interiors of Andhra Pradesh where he would ask me about the crops on the roadside, harvesting cycles, Telegu signposts, and erratic sales. I answered all his questions confidently, safe in the knowledge that neither of us knew the answers. Over the years, I like to believe, my solutions have become more fact based.
Two incidents last week reminded me that I do not always have all the answers and, my field of work, insurance has considerable limitations. I was invited to a panel discussion on mental health and insurance. The audience consisted mostly of caregivers and some suffering from mental illnesses. The panellists were from insurance, NGOs and the medical profession. The most poignant question was from an 80-year-old, ram-rod straight gentleman who said that he had taken care of his schizophrenic daughter all his life but “is there an insurance that can take care of her after I die?” We, the panellists, spoke about risk, underwriting and products but the plain fact is that insurance cannot help in this situation.
The second incident concerns a migrant family that I have known for a few years. A member of the family developed high fever and we directed him to a private hospital. Since hospitalisation costs were high, about ₹30,000, he went to a nearby secondary-care government hospital where no beds were available, and so was redirected to a premier tertiary government hospital. Here, he was admitted but had to sleep on the hospital floor, for lack of space. After a day, worried about the poor hygiene, he decided to return home, suffered a relapse and died a few days later.
There are many situations, such as these two, where insurance cannot help. If you are already ill, for example. People suffering from illness are the most eager to buy health insurance. But, for most, it is already too late. If you have had a disease that impacts one of the core body systems—cardiac, endocrine, mental health, neurological, renal, among others—then it is difficult to buy any insurance at all. For people suffering from mental ill-health, the issue is not so much that mental illness costs cannot be covered but more that even their physical ailments are not insurable. You have to buy health insurance when you are well and do not need it.
Similarly, insurance is ineffective if the main costs are for out-patient medicines, diagnostic tests or home care. In mental illnesses, the caregiver’s time is most expensive. In diseases such as stroke, where hospitalisation may not be extensive, the primary cost is an inability to work. Traditional mediclaim does not pay these costs. Some newer products can help but in a limited way.
Over the years, critical illness plans have steadily improved and now include diseases that do not require hospitalisation, such as stroke, Alzheimer’s or Parkinson. This insurance pays a fixed benefit not linked to actual medical costs.
Insurance does not help in cases that require long-term care. The commonest afflictions of the elderly require high-quality home care for life. Nurses or paramedics may be needed on call. In many situations, assisted living is required. These costs are hard to insure. In some international markets, long-term care insurance has been introduced, rather unsuccessfully, because care costs are extremely high.
Insurance is not a substitute for building quality medical capacity. For the migrant that died, the issue was that both the private and government hospitals failed to give him basic care in a hygienic or affordable manner.
Understanding these limitations is the starting point of finding meaningful solutions. From an insurance standpoint, we must build scale and acquire better morbidity data. Scale allows insurers to insure riskier lives and diseases. The costs of a few ill patients are spread over a larger base and this allows the business be sustainable. Group health insurance, that companies or communities can buy, covers many lives in one go and is able to insure people that are uninsurable in individual insurances. The information on morbidity is basic. Illness rates are not easily available.
Doctors and insurers, always at loggerheads, must be brought together in a meaningful way for effective solutions. Perhaps then insurance can break out of some of its limitations.
Source: LiveMint.com
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