As consumers we are often price conscious; and this trait is even followed while insuring own health. While buying a health insurance policy, many are sensitive to the price they pay for insuring (i.e. the premium) and often take a decision considering that to be paramount. Thus when we find the insurance company increasing the premium erratically, we find it rather discomforting and express annoyance. Many policyholders have in the past accused health insurance companies of hiking premiums manifold at the time of renewal without offering any explanation for the revision.
But now to crack the whip, the insurance regulator - the Insurance Regulatory and Development Authority of India (IRDA) is taking coherent stance in line with this price sensitive behaviour, whereby it has asked health insurance companies to indicate premium to be paid by the policyholder in the first five years while filing new products for its approval. Even for older products, it is expected that the insurance regulator may ask insurers to hold premiums for at least two to three years.
It is noteworthy that at present insurers are free to increase their renewal premium based on:
- Medical inflation
- Cost of healthcare
- Underwriting practice
Thus whenever the health insurers want to increase the insurance premium of the products, they have to approach the IRDA and given a written explanation for the increase in premium of a particular product(s).
IRDA chief, Mr J. Hari Narayan in the past has publicly criticised insurance companies, for their practice of "loading" of premium (i.e. increase in premiums) on the basis of previous claims made by the policyholder. "We have seen that if a party makes a claim in a given year, it is likely that the insurance company may increase the premium because you have made a claim. To some extent, it means they are doing underwriting at the time of the claim. And that is not the way you do underwriting. That is what we are bringing in draft regulations", said Mr J. Hari Narayan at an industry conference earlier this month.
We are of the view that, with indicative premiums being instilled by IRDA on new products, the policyholders would be furnished with premium chart (at least for five year tenure) thereby enabling them to know the premium they would have to pay in the ensuing years for renewing their health insurance policy. Also erratic hike in renewal premiums could be thing of the past, as there seems to be strict vigilance coming forth even in the manner in which underwriting would be done by health insurers, as the IRDA chief seems to have voiced his concern over the way underwriting is practiced at present.