IRDAI states that Insurers cannot modify existing benefits in health policy

The Insurance Regulatory Development of India (IRDAI) issued circular barring insurers to modify benefits in the existing health policies or add new benefits to the existing health plans, resulting in a higher premium. The IRDAI issued these guidelines for protecting policyholders from an abrupt increase in the premium because of such changes.

However, the IRDAI clarified that the general and health insurers could affect some minor changes in the health policies according to the Consolidated Guidelines on Product filing in Health Insurance Business issued by the IRDAI on 22nd July 2020. Accordingly, adding new benefits or upgradation of existing benefits can be done as add-on covers or optional covers with a standalone premium rate, thus, ensuring an informed choice to the policyholders. 

The circular also stated that the appointed actuary should review every health insurance product’s financial viability annually as per the regulations of the IRDAI (Health Insurance) Regulations, 2006. The actuary must submit the status report by 30th September of every financial year.

The actuary should submit the report of the review to their Board. The report must be accompanied by the analysis of a favourable or unfavourable experience of each product. It must also suggest corrective measures when the result of a product is unfavourable to ensure the product’s sustainability and protect the interests of policyholders of the underlying products. 

The circular also provided that for easy understanding of the policy contract contents, the insurers should arrange all health insurance products’ policy contracts with clear headings in the order as prescribed in the circular. The circular provides for the headings that are to be present in the policy contracts. The insurers must follow the order of the headings in the policy contract from 1st October 2021. 

Usually, the insurer cannot modify or revise a product within one year of its clearance by the regulator. However, there are instances where the insurance companies have increased the annual premiums unexpectedly at the time of renewal of the policy, creating a burden on the policyholders. This circular by the IRDAI aims to prevent such incidents by granting the policyholders an option to choose add-ons or additional benefits as per their choice.

As per the new guidelines, the insurers cannot add additional benefits to an existing health benefit product and hike premiums. They will have to offer add-ons or additional benefits to the policyholders as an option. Thus, the policyholders will have the discretion to choose the offer for additional benefit covers with a standalone premium rate or reject it and continue paying the current premium for the policy. 

The new guidelines in the circular issued by the IRDAI will safeguard the interest of the policyholders. However, it will limit the insurance companies from levying additional charges, restricting the addition or introduction of new features in the existing health policies. The guidelines issued by the IRDAI is a positive move towards the protection of the policyholders and restricting the abrupt increase in premiums of the health policies at the time of renewal.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in

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