IRDA health insurance guidelines issued last month will ensure that your cumulative bonus does not go down to zero after you file a claim. Claim in overlapping policy periods will get benefit of available sum insured in the two policy periods. Will the insured misuse it for planned hospitalisation?

Insurance Regulatory and Development Authority (IRDA) health insurance guidelines addresses several issues like lifelong renewals, special provisions for senior citizens, transparency in premium and claims based loading as well as restricting role of TPA to claims processing and not settlement. Other important change includes ensuring that your no-claims-bonus (NCB) does not go down to zero if you lodge a claim. Claim in overlapping policy period will benefit from having sum insured in the two policy periods being available to pay your hospital bill.

NCB change – IRDA health insurance guidelines states that insurers may offer cumulative bonuses on indemnity based health insurance policies (mediclaim), which shall be stated explicitly in the prospectus and the policy document. If a claim is made in any particular year, the cumulative bonus accrued may be reduced at the same rate at which it is accrued. Cumulative bonus shall not be allowed on benefit based policies.

The new change will surely help mediclaim policyholders. But, will insurance companies be keen to offer NCB at all? Some insurance companies have dropped the NCB feature and possibly more will follow as the policyholder will not fear filing low value claim as NCB will not be completely lost. Earlier, the insured thought twice before filing low value claims due to NCB going down to zero.

For e.g. Many mediclaim policies offer 5% NCB every claims free year with a maximum of 50% NCB. If your base sum insured (SI) is Rs2 lakh then after 10 claims free year, the NCB will give benefit of additional 50% of base SI which is Rs1 lakh. If there was claim in 11^th year, the policyholder used to lose all the NCB. It would go back to zero NCB. With the new rules given in health insurance guidelines, having a claim in 11^th year will only reduce the NCB from 50% to 45%.

Insurer and not TPA to settle health insurance claims

The second important change is claim overlapping policy period. There have been real examples of policyholder hospitalised for a duration which falls across two policy periods. The insurance companies would consider the sum insured available on the day of hospital admission and ignore the sum insured of the subsequent policy period. Under the new guidelines, the insurance companies will have to consider the leftover sum insured of the existing policy and new sum insured as the claim is overlapping in the two policy periods. While this will certainly benefit policyholders, it is possible to misuse this feature for planned hospitalization. It can be done by manipulating the dates to overlap the two policy periods for specific procedures planned in advance.

IRDA health insurance guidelines states – If the claim event falls within two periods, the claims shall be paid taking into consideration the available sum insured in the two policy periods, including the deductibles for each policy period. Such eligible claim amount to be payable to the insured shall be reduced to the extent of premium to be received for the renewal/due date of premium of health insurance policy, if not received earlier.

For e.g. Policyholders may have mediclaim of Rs1.5 lakh SI of which only Rs1 lakh SI is available due to prior claim of Rs50,000. If the insured if hospitalised for a period that overlaps two policy periods, then the insured can benefit from leftover SI of existing period (Rs1 lakh) and SI of the new policy period (Rs1.5 lakh). If there is a claim up to Rs2.5 lakh, the policyholder can expect full recovery of claim amount from the insurance company subject to other sub-limits imposed by the contract. If the insured has not paid the premium for the new policy period, then it will be deducted from the claim amount.

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