Policyholderhs will remain troubled despite IRDAI’s clarification as insurance companies have increased health cover premiums citing higher claims
Ever since the insurance regulator’s mandate on standardization of health insurance exclusions came into effect from October 1, 2020, many policyholders have complained that their premiums have gone up drastically. However, the Insurance Regulatory and Development Authority of India (IRDAI) has clarified that the change in premium due to change in norms is not more than 5 per cent.
IRDAI has said, “Insurance companies were allowed to modify the base premium by up to 5 per cent of the original approved premium rates to comply with the guidelines for standardization of exclusions. It has been allowed to do this as a one-time measure for easy transition of existing products so that the business remains profitable for the companies and they are able to survive in the market.”
The regulator has said that as on 30 September 2020, out of a total of 388 products, only 55 have seen an increase of 5 per cent in premiums.
n addition, five health insurance products have seen more than 5 per cent increase in premiums.
According to IRDAI, the reason for this increase has been the Increased Claims Ratio. Inked claims ratio is the ratio of total claims paid out of the premiums accumulated during the year.
If this ratio is high, then the business becomes unprofitable and due to this the insurance companies have to increase the rates of premium.
According to data from Policybazaar.com, about 10 per cent of the company’s total customers who have renewed policies said that their premiums have increased by more than 30 per cent. About 8% of policyholders’ premiums have gone up by 15-30 per cent.
Amit Chhabra, Business Head (Health), Policybazaar.com says, “Premiums increase with age. Generally, policies have an age slab of 5 years. For example, as long as you are in the age bracket of 30-35 years, there is no change in your premium. As you move beyond the age of 35, you move to the next age slab and your premiums move into a pre-determined premium grid. This is one of the most common reasons for increase in premium in most of the cases.”
Apart from this, new norms and inverse claim ratio, increase in healthcare expenses due to COVID-19 and regular inflation in medicines and treatments also play a big role in the increase in overall health premiums.
Harshvardhan Rungta, financial planner, Rungta Securities, says, “Medical inflation is on the rise and there is no regulatory control on hospital prices. Insurance companies are trying to fix package rates, but that hasn’t helped either. When the rates are fixed in this way, the hospitals force the patients to pay the dues.”
Old Customers, New Products
In some cases, there could be another reason for the steep hike in rates. If you take a new policy over and above the previous cover, the premium increases.
Policyholders are not given the option to continue with the existing policy in such cases. Moneycontrol has raised this issue which has been a major cause of concern among policyholders in the past as well.
Of course.org founder Mahaveer Chopra says, “Some insurance companies have discontinued their existing products and have given their policyholders the option of migration. This thing has not been covered in the IRDAI clarification.”
In these, new products may be better than older products which may include new features. But, for policyholders, this can directly mean higher premiums regardless of whether customers like the new benefits or not.
private general insurance company for the last 17 years.
It is a family floater policy in which his father of 74 years and mother of 65 years is also covered.
In December 2019, the company terminated their policy and cited unavailability as the reason behind it. Also, the company shifted the family to a new product.
With this, Reddy’s premium increased from Rs 21,762 to Rs 66,667. This increase was more than 200 percent. The insurance company justified the hike and told them that in the new policy, they are getting more benefits like getting rid of room rent restrictions. Along with this, wellness benefits and cover reload are also available in it.
Reddy says, “What struck me the most was that they did not give us any benefit of a loyal customer who had been associated with their company for the last 16 years. No consideration has been given to this thing, I have been associated with the company for so long.”
He lodged his protest but, at the same time, he also remained associated with this policy. After October 2020, when IRDAI’s standardization guidelines for existing policies came out, they got another advance notice informing them about another hike in premium. He was told that he would have to pay this increased premium on the date of renewal of his policy.
An angry Reddy says, “This time they have increased the premium by 64 per cent to Rs 1.09 lakh. The company has attributed this steep increase in premium to the sharp increase in the cost of medical treatment.
Limited options with policyholders
For policyholders and especially those who have been paying their premiums for a long time, the increase in premiums is a big setback.
This is also because shifting to another product keeping waiting period credit for pre-existing diseases is not easy at such an age.
Since, senior citizens are battling various ailments at this age, other insurance companies do not bother to associate them with them at reasonable premiums.
Chopra says, “These changes should happen at the ecosystem level. Senior citizens have limited options. In such a situation, creating an adequate health fund can be an option. Through this, if you have enough money and can meet the cost of your treatment on your own in the long run, then you can think of terminating your policy. However, you have to keep this in mind that it will be difficult for you to get an idea of how much the cost of different types of treatment will increase.”
In such a situation, it is also not easy to estimate how much money you should set up a healthcare fund for yourself.
Rungta says, “Also, you must remember that the sum insured of your health insurance gets the same again every year, even if you have taken a claim. This does not happen with the funds you have created. Once the money is spent on the treatment, you will have to save separately to meet the shortfall in the fund.”
However, your built-up fund can go a long way in making up for any deductions. Deductions are deductions that are not paid by the insurance company while paying your hospitalization bill. You have to pay this money. This fund proves to be useful for you even when you are in an older age and do not have any kind of insurance cover.
Chhabra of Policybazaar recommends that if your premium exceeds 10% of your sum insured, you should consider porting to other insurance companies or products.
He says, “If you feel that the premium hike is unnecessary, you can consider porting options. You can consider other affordable policies in the market, including the ones available for senior citizens. However, note that there may be a number of restrictions, including up to 30 per cent co-payment and other limits. So it is a mixed game. Policies can be cheap, but you should also consider the restrictions that can take your spending out of budget.”
You can consider such plans keeping in mind your needs, budget and what is being offered. Build your healthcare fund as a backup so that you can pay out of pocket in case of low sum-insured or co-pay and room rent limits.
