The Covid situation is an indication of poor policyholder experience with health insurance

| Updated on June 19, 2020

IRDA must tone up the grievance redress mechanism via the insurance ombudsman and mandate public disclosures of claims settlement ratios by health insurers

As the number of Covid-affected in India burgeons, patients already grappling with the lack of hospital beds and astronomical treatment charges at private hospitals are finding their health insurance policies to be of limited utility. Initially, there was uncertainty about whether WHO’s declaration of Covid as a pandemic would exclude treatment for it under clauses embedded in insurance contracts. After clarifications from the Insurance Regulatory and Development Authority (IRDA) that they would cover Covid, fresh confusion has now arisen about whether home treatment costs would be reimbursed. A BusinessLine report reveals that, even in contracts that explicitly covered domiciliary treatment, patient claims are being repudiated by insurers who insist that a stint at the hospital is mandatory. While giving their older customers a run-around on Covid, health insurers have not been averse to launching new Covid-specific plans with much fanfare. IRDA has tried to intervene by issuing instructions that require insurers to expeditiously handle Covid claims, intimate their decision quickly to hospitals and include Covid under their standard covers. But these guidelines are subject to ‘applicable terms and conditions’ and there’s considerable leeway for insurers to take recourse to escape clauses.

It is not just in the Covid situation that holders of health insurance policies in India often find their claims turned down; this is a common occurrence across medical emergencies. Despite levying hefty premiums, health covers come with loads of fine print that specifically exclude many types of treatment, impose long waiting periods for coverage and specify deductibles, while seeking co-payment from the insured. The lack of standardised treatment charges at private hospitals, which are prone to over-billing, also leads to claims being rejected at the nth hour. All this is probably why the claims settlement ratios of health insurers in India, averaging about 80 per cent, are far inferior to those of life insurers (over 95 per cent).

Many of IRDA’s recent interventions do attempt to make health policies investor-friendly. Last week, it issued new guidelines to standardise health insurance terms which require insurers to pay penal interest for unreasonable delays in settling claims and bar them from contesting claims on grounds other than fraud, for policies that have completed eight years. But going by patchy compliance with earlier guidelines, we need to see if this improves the policyholder experience. IRDA must tone up the grievance redress mechanism via the insurance ombudsman and mandate public disclosures of claims settlement ratios by health insurers.

Published on June 19, 2020

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