“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,” said the Insurance Regulatory and Development Authority of India (Irdai), via circular dated 28 December 2020.
Also Read | How Indians lived online during 2020
The insurers are required to disclose premium/benefit illustration norms on or before 1 April 2021.
Why there is a need for benefit illustration for health policies
“Health policies have become complicated over recent years with the addition of several benefit options, for instance, add-ons, nil claim bonuses etc. This is probably why health policies have not had a standard benefit illustration,” said Chandan D. S. Dang, Executive Director, SecureNow.in, a Delhi-based online insurance broking firm. He further said, “It, however, makes it even more desirable that prospective policy buyer should be able to clearly understand the price and the benefits on offer in a health insurance policy in a simple manner.”
Now with the help of benefit illustration, it will clarify the coverage everybody has at an individual level. Also, the policy buyer can have a better and clear understanding as to how much sum insured is available to all the covered members in the policy.
Amit Chhabra, Head- Health Insurance, Policybazaar.com said that today customers can buy either separate individual policies, or a family floater policy with a common sum insured, or a floater policy with individual sum insureds for every member. This can get a bit complex for policy buyers at times to understand and comprehend, hence to simplify this, the regulator has asked insurers to clearly call out the sum insured available to each insured covered in a policy. “Sum insured coverage is the single most important factor for a health insurance policy, and this will go a long way in simplifying this for policy buyers,” added Chhabra.
How the benefit illustration will work
In respect of every health insurance product offering individual and family floater options, the benefit illustration with the indicative ages/sum insured will have to be provided by the insurer. Further, based on product construct and as per the eligible parameters of members of the family to be covered, the indicative ages shall be selected from all of the following age bands:
a) 20 or less, b) 21-30, c) 31-40, d) 41-50, e) 51-60, f) 61-65, g) 66 or more.
According to the IRDAI circular, “Where it is not possible to present the illustration considering coverage of all the indicative ages under a single policy as per the product design, insurers shall present two separate illustrations covering as many numbers of age bands, as possible.”
The benefit illustration will help to simplify the policyholder’s understanding of the premium payable vis-a-vis the benefits. The benefits have been classified in three categories: (i) on individual basis (covering each member of the family separately), or (ii) on individual basis covering multiple members of the family under a single policy (where the sum insured is available for each member of the family), or (iii) on family floater basis with an overall sum insured (where only one sum insured is available for the entire family).
Naval Goel, CEO & Founder, PolicyX.com said, “IRDAI has stipulated insurance companies to provide benefit illustrations which will basically include coverages for specific age bands and each member of the family in case of a family floater plan. In most of the cases, per member separate cost is not usually included in current policies. This disclosure is beneficial from a policyholder’s perspective as he/she will know the breakup of the cost per member and in case of addition or deletion of a member from the health policy, he/she can easily calculate the increase or decrease in premium.”
Will the benefit illustration be helpful for all?
With the help of the benefit illustration, you may be able to simply and clearly understand the price to be paid (the premium) vs the benefits on offer for each health policy. Dang said, “A few further clarifications may make it even more robust. For instance, certain family health policies feature a family buffer. Here each member of the family has coverage for an individual sum insured, say ₹6 lakh, but there’s also an additional family buffer amount, say ₹10 lakh. The family buffer can be partly or fully used by any of the family members, once they have exhausted their individual amounts of ₹6 lakh. To be able to include such a feature in benefit illustration would be ideal.” He further said, “It would also be helpful if the many add-on features available today (such as hospital cash cover, critical illness covers) and other additional features like restoration benefit could be included in the benefits description. However, overall the benefit illustration for health insurance policies is a very positive and client-friendly step taken in the right direction.”