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Health InsuranceJanuary 21, 2021

Disclose premium illustration for health insurance policies – IRDAI asks insurance companies.

Insurance Regulatory and Development Authority of India (IRDAI) has asked insurance companies to clarify benefit/premium illustration for all health insurance policies, including individual and floating ones. The illustration will explain the insurance coverage to the policyholders, which will give them a clear understanding of how much sum assured is available to all the members covered in the policy.

Disclose premium illustration for health insurance policies - IRDAI asks insurance companies

“This will bring out a clear distinction between the availability of coverage under family floater basis and on individual basis vis-à-vis the premium payable,” stated the Insurance Regulatory and Development Authority of India (IRDAI), through a circular dated December 28, 2020. The insurance providers need to disclose the premium/benefit illustration norms on or before April 1, 2021.

The need for premium/benefit illustration 

With several add-ons, benefits, riders, and other features, health insurance policies have become complicated over the past few years. These policies’ procedures can be complex to understand and require efforts on the part of the customers to understand fully. Hence it has become essential that the prospective policy seekers clearly understand the pricing and benefits offered under a health insurance policy.

Nowadays, policy buyers can either opt for individual or family floater health insurance plans with a common sum assured or individual sum insured for every member. This can be quite confusing to understand. Hence, to simplify this process, the insurance regulator has asked the insurers to clearly clarify each member’s sum assured amount in the health insurance policies. The insured amount to the policyholders is an essential part of any health insurance policy as it is money that the customers deal with at the end of the day. So, this becomes incredibly important that both the insurers and the customers are clear on the terms and policies related to the sum assured, and proper transparency is maintained between them.

How will premium/benefit illustration work?

As a part of every health insurance product, the insurer needs to provide the benefit illustration indicating ages/sum insured. Further, based on the product built and the eligible parameters of family members, the indicative ages shall be selected from the following age groups – 20 or less, 21 – 30, 31 – 40, 41 – 50, 51 – 60, 61 – 65 and 66 or more.

As per the circular issued by IRDAI – if, under a single policy, the illustration considering coverages for all the indicative ages is not possible to present, in such case, the insurers shall present two distinct illustrations covering as many as age bands as possible.

IRDAI has also asked insurance companies to provide customised premium/ benefit illustration in the same format as specified on their websites, such that the customers can make out the difference while selecting the coverage wherein:

  1. Every member of the family will be separately issued an individual insurance policy, at a time.
  2. Several members covered under a single policy with a sum insured available separately for each member as a part of the family plan or
  3. Multiple members covered under a single policy with a sum assured available for the entire family on a floater basis.

How will premium illustration benefit be helpful for all?

With the help of premium illustration, the customers will be able to clearly understand the premium amount to be paid, comparing with the benefits on offer with each health policy. The customers will also be able to clarify their coverage in terms of how much sum is available and is assured to each member of the family. Moreover, if the add-on features that are available today like hospital cash cover, critical illness cover, and other features such as restoration benefit could also get included in the premium/benefit illustration description, then the id would be more useful for the customers.

Overall, this entire initiative by IRDAI is a positive step towards bringing transparency between the insurer and the insured. This will also help build trust between both and perhaps will result in higher penetration of health insurance policies.

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Keep this going please, great job!