Changes and Covid Impact on the Health Insurance Industry in India

Introduction

Insurance or rather forms of insurance, such as bottomry[1] have been part of most societies from time immemorial. In India, the idea of insurance was initially used to protect against more natural calamities such as floods, epidemics, etc., and can be found in the texts of Manusmriti, Arthashastra, and other ancient Indian texts. Currently, there are various kinds of insurance available in India can be broadly classified based on the risks and hazards. A few examples of the mentioned are life insurance, health insurance, property insurance, travel insurance, micro-insurance, etc.

Insurance is important not only to individual policy-holders but also to the economy as a whole. Individuals may take up insurance policies for different purposes, such as to protect themselves against a possible loss, or even as a means of investment. On a large scale, the insurance penetration in India, that is the percentage of insurance premium in the country’s Gross Domestic Product is currently approximately 3.71%[2]. Thus, the contribution made by the insurance sector to the overall economy may not be significant yet is still quite notable.

This article revolves around the health insurance industry in India, the recent legislative changes, and the impact of Covid on the same.

Health Insurance in India

Section 6C of the Insurance Act 1938[3] defines health insurance business as “the effecting of contracts which provide for sickness benefits or medical, surgical, or hospital expense benefits, whether in-patient or out-patient travel cover and personal accident cover.” Therefore, a health insurance policy is the kind of insurance that covers expenses regarding the policyholder’s health, according to the terms of the policy. The following are a few essentials of a health insurance policy:

• The policyholder has an insurable interest in the subject matter of the insurance, that is – the health insured.
• The policy is a contract of indemnity. This means that the insurer can either reimburse the expenses incurred by the insured; or can pay the hospital through a Third Party Administrator.
• The policy is based on good faith. The parties involved have a duty of full disclosure of material facts that are relevant to the insurance contract.

There are several health insurance policies in India, and each varies in parameters such as the premium paid, benefits derived, etc.

Benefits of Health Insurance

Depending on the kind of policy, the benefits can be as follows:

• In case of sickness, ailments, accidents, or any other unfortunate health detriment, an insurance policy provides for financial assistance by covering the medical expenses, including but not limited to hospitalization charges, surgery, physician’s fee, laboratory tests, ambulance costs. Comprehensive health insurance policies also tend to cover other expenses incurred, for instance, physiotherapy, routine checks, home nursing, etc.
• Section 80D of the Income Tax Act, 1961[4] provides for a deduction in respect of health insurance premium. According to the policy and the age of the concerned individual, the deduction available can range from Rs.25,000 – Rs.50,000 per individual.
• In the scenario where the policyholder does not make any claim against their health insurance policy, they become eligible for a No Claim Bonus. This can be given by the insurance company as a cumulative benefit to the beneficiary or the company may provide a discount on the premium of the said health insurance policy. The limit on money awarded for the No Claim Benefit is decided by the insurer, based on the insurance policy.
• Private insurance policies provide special policies such as long-term care insurance policies. These policies are mainly aimed at senior citizens who are above the age of 65 and require constant medical attention and care. These policies usually take care of expenses of in-home nursing supervision or assisted living facilities, including other costs associated with the senior citizen’s health disablement.

Though the advantages that come with a health insurance policy are innumerable, some disadvantages arise from the health insurance policies. The major disadvantage concerning participation in health insurance policies is cost. A higher premium generally means more benefits derived, ergo policyholders are required to pay a high premium for a more extensive insurance policy. Private insurance policies and comprehensive insurance policies inevitably charge a higher premium from the policyholder. Another disadvantage involved with taking a health insurance policy is that of pre-existing conditions. Policyholders that have pre-existing conditions such as diabetes, blood pressure, heart patients are subject to a waiting period.

This means that if an expense arises which concerns itself with the pre-existing condition, it will not be covered by the insurance company until the mentioned waiting period is over. The waiting period can range anywhere from a few months to a few years. There also exists a certain amount of complexities regarding the renewal of health insurance. The insurer may act arbitrarily, however landmark cases[5] have set out the precedent to help remedy this problem. Various changes in relevant legislation have also ensured a more balanced and beneficial approach for both the insured as well as the insurer.

Status Quo of the Health Insurance Industry

The latest and most significant amendments made in the health insurance industry emanates from the (Health Insurance) Regulations, 2016 that are laid down by the Insurance Regulatory and Development Authority of India (IRDAI)[6]. A few important changes brought by these regulations are as follows:

• Section 2(l) of (Health Insurance) Regulations, 2016 allows the sale of Pilot Products. Pilot products introduced by insurance companies refer to those policies that engage in matters that are not typically covered by the insurance companies. This permits the company to bring forth novel and innovative policies. If these policies deem to be viable, then the pilot product may be adapted as a regular policy offered by the insurance company after 5 years at the maximum. In the contrasting scenario, the company may disengage from such a product.
• Various provisions, especially Section 11 and Section 29 of (Health Insurance) Regulations, 2016 lays down the importance of disclosure of data. A Product Management Committee (PMC)[7] is required to be formed as per the Product Filing Guidelines. These measures are taken to ensure that claims and products offered by the company are strictly in adherence with the new guidelines. Products offered should be approved by the concerned authority before entering the market and can be withdrawn with adequate reason by the PMC.
• Several provisions in the (Health Insurance) Regulations, 2016 make way for incentivizing existing and potential policyholders. Section 8 (d) and Section 19 states that a policyholder may benefit from their wellness habits. This implies that certain discounts may be awarded to policyholders that are long-term customers and in specific health, check-ups to promote wellness amongst policyholders. Furthermore, discounts may also be given on premiums, based on the policyholders’ wellness and preventive habits. However, it is mandated that the parameters of giving such discounts should be well-defined for each product.
• Section 2(j) and Schedule II of the (Health Insurance) Regulations, 2016 introduces and lays down the administration of Health plus Life Combi Products respectively. Such products are essentially a combination of a health insurance policy and any life insurance policy. Such products allow customers to enjoy an easier approach to two desired insurance products brought under one policy. These Combi products undoubtedly have to be approved under the File and Use procedure and should indefinitely be according to the Product Filing Guidelines. Although these amendments have proven to be beneficial to the industry as a whole, there still exist certain challenges that need to be overcome especially concerning the pandemic.

The Corona Virus and its Impact on Health Insurance

With the Corona Virus causing an unprecedented situation worldwide, organizations of various industries feared losses and futility. The health insurance industry to deal with the changes in the market because Covid’19 was relatively quick to realize and act upon required changes. There was a respective hike in the health insurance industry opting for more digitalized modes of conducting their businesses. One could access and avail the processes, from buying an insurance policy to claims settlement and everything in between, just by a click of a button. What would have otherwise taken years to accomplish; the fear of the pandemic and its impacts pushed many to overlook their skepticism and resort to online measures of buying and managing their health insurance policies. This shift also nudged various companies that were still operating in the offline mode to follow the steps of other pioneer companies in this regard. Covid’19 have also brought about other schemes into the picture. Health insurance companies have started providing term policies that are predominantly concerned with the Corona Virus and its ill-effects.

Furthermore, the government and other concerned authorities have also brought about changes in the industry concerning the pandemic. IRDAI has laid down a plethora of guidelines[8] accompanied by relevant circulars to the insurance companies for the administration of Covid cases. These guidelines deal with the handling of claims, renewal of policies, cashless facilities, discounts with special regard to Covid treatment. Some noteworthy features of the guidelines are as follows:

• Hospitalization charges that are typically covered in a policy, should include that may arise from Covid cases as well. Other costs that arise due to Covid, such as expenses related to isolation and quarantine may be recovered according to the terms of the existing policy.
• The rejection of claims of Covid cases will be thoroughly scrutinized by the claim review committee.
• Consideration and reasonable extensions are required to be granted to policyholders in cases such as payment of premium, renewal of policies, etc.

Policies Implemented by the IRDAI to handle Covid cases

• Aarogya Sanjeevani Policy – From April 2020, all insurance companies have been required by the IRDAI to provide the Aarogya Sanjeevani Policy. This policy is an initiative was taken to provide individuals with a cheaper alternative of insurance that covers the essential health-related expenses including Covid. The Aarogya Sanjeevani Policy provided by most companies offers coverage of Rs 1 Lakh to Rs 5 Lakhs.
• Corona Kavach – This term health insurance policy aims to indemnify those policyholders, their hospitalization, and other related expenses incurred due to being infected by the Corona Virus. The minimum period to be admitted to avail of this policy is 24 hours.
• Corona Rakshak – This term policy provides for the policyholder to be paid the 100% lump sum amount assured if admitted due to contracting a case of the Corona Virus. The policyholder should meet the policy’s conditions and are usually required to be admitted for at least 72 hours.

Conclusion

As stated previously, the insurance penetration amounts to roughly 3% of the GDP. Also, according to a relevant report by the National Sample Survey Office, it was found that approximately 80% of the Indian population lack health insurance. This is although the wide range of options to select from, with policies costing as low as Rs. 500-1000. There are also a large number of government schemes that allow citizens to avail health insurance at an extremely affordable price. One such noteworthy scheme is the Pradhan Mantri Jan Arogya Yojana (PM-JAY). This scheme is one of the largest health insurance schemes in the world and mainly focuses on providing services and benefits to the more poor and vulnerable families in India.

By this, it is understandable that though one of the biggest disadvantages of taking health insurance is its cost, there are plenty of alternatives that one could choose from. However, despite these alternatives, the percentage of citizens utilizing these services is extremely low.

Therefore, it seems to be that the only reasonable explanation for such deplorable rates can be the lack of awareness. The government should therefore strive to initiate campaigns and other measures to raise awareness for the necessity of health insurance in both urban and rural India. Rural India would require a more comprehensive method to help them understand the basics, necessity, and benefits derived from insurance. On the other hand, urban India also does not participate in the taking of health insurance policy regardless of their knowledge in the matter. Thus, urban India must be shown that health insurance is not an unnecessary expense, but rather a vital factor for their all-round wellbeing. Campaigns should promote special schemes such as ones that give a discount for girl children and independent women.

After being affected by the pandemic, the government has asked employers to mandatorily provide their employees with medical insurance[9]. However, it may be recommended that the government of India mandates health insurance to all the citizens and does so in phases, to gradually ensure that every citizen enjoys the benefits of health insurance.

REFERENCES

• [1] https://www.britannica.com/topic/insurance/Historical-development-of-insurance
• [2] https://www.ibef.org/industry/insurance-sector-india.aspx#:~:text=2.13%20trillion%20
• [3] http://legislative.gov.in/sites/default/files/A1938-04.pdf
• [4] https://cleartax.in/s/medical-insurance
• [5] Biman Krishna Bose v/s United India Insurance Co (2001) 6 SCC 477
• [6]https://www.irdai.gov.in/ADMINCMS/cms/Uploadedfiles/Guidelines%20on%20Standardization%20in%20Health%20Insurance%202016.pdf
• [7] https://www.mondaq.com/india/insurance-laws-and-products/470568/product-filing-procedures-for-general-insurance-products-significant-overhaul-of-the-file-use-procedure
• [8] https://www.irdai.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=PageNo4137
• [9] https://economictimes.indiatimes.com/wealth/insure/health-insurance/post-lockdown-employers-must-mandatorily-provide-medical-insurance-to-employees/articleshow/75263595.cms?from=mdr

This article is authored by Lenity Thomas, student at Christ University, Bangalore.