Premium hike after health insurance standardisation: IRDAI changes norms to stop malpractice

After the Financial Express Online published a story on February 24, 2021, drawing attention of the Insurance Regulatory Authority of India (IRDAI) towards the complaints received from the holders of health insurance policies that insurance companies have increased the renewal premium on the pretext of standardisation, the insurance regulator has asked the insurers not to modify the existing policies, that leads to increase in premiums.

In a circular dated March 16, 2021, addressing CEOs of all General and Standalone Health Insurance Companies, IRDAI informed that it has added some additional norms in addition to the norms specified at Clause (C) of Chapter-III of the guidelines that general and health insurers should adhere to while effecting modification of existing products.

According to some of the new norms –

• General and health insurers are not allowed to modify the existing benefits, add new benefits in the existing products, which leads to imposing an increase in premium. However, it is clarified that insurers are permitted to effect minor modifications as stipulated at Clause (G) of Chapter – III of consolidated guideline on product filing in health insurance business.
• Addition of new benefits / up-gradation of existing benefits may be offered as add-on covers or optional covers with standalone premium rate to ensure an informed choice to the policyholders.
• To simplify policy wordings, the IRDAI has asked the insurers to arrange the contents of policy contracts in a specified manner with clear heading, which is to be adopted in respect of all policies issued from October 1, 2021. The insurance regulator has also specified that customising the policy contracts of the existing products to comply with the new format will not be considered as modification.

In its story, the Financial Express Online had reported that – after standardisation of the health insurance policies, policyholders are getting renewal notices with higher premium even as there are no changes in the age slab of policyholders or in the sum insured.

Why standardisation of health insurance policies leads to increase in premium?

Attracting the notice of the IRDAI, the story mentioned that – along with standardisation of features of the policies – there is a need for standardisation of premium as well.

While the IRDAI has barred the insurers from hiking the premium of existing policies by modifying their features, it’s time to see if the insurers roll back the hike and refund the excess premium already collected from the existing policyholders or not.