The new insurance rules came into effect on April 1st, 2024. What has the Insurance Regulatory and Development Authority of India said about designing products for senior citizens? Will all types of existing medical conditions be accepted? Read here to learn more.
The Insurance Regulatory and Development Authority of India (Insurance Products) Regulations, 2024, came into force on April 1.
Introduced as part of a wider reforms agenda that the IRDAI has been actively pushing for in recent months, the new norms covering various aspects of life, general and health insurance have generated considerable interest, particularly around a presumed change in the upper age limit to avail a new health cover.
New Insurance Rules 2024
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Two major insurance rules that are effective from April 1, 2024, are:
- compulsory e-Insurance policies for new policyholders and
- the latest surrender charges of the life insurance plan such as endowment policies.
e-Insurance mandatory for new policyholders:
- As of April 1, 2024, insurance policies must be kept in an electronic format. The way investors keep shares in a demat account is quite similar to this.
- It is mandatory to purchase electronic insurance policies, which are stored in a demat account known as an e-Insurance Account (eIA).
- The Central Insurance Repository of India, Karvy, NSDL Database Management (NDML), and CAMS Insurance Repository are the four repositories from which you may establish an e-Insurance Account.
- There will be less paperwork as a result.
- This innovation streamlines procedures for both clients and insurers by guaranteeing the security of policyholder data and enhancing accessibility by doing away with cumbersome paperwork.
New surrender charges:
IRDAI has announced the final set of surrender charges in non-linked or linked life insurance products – traditional endowment policies. These charges are going to be effective from April 1, 2024.
- 30% of total premiums paid if surrendered during the second year.
- 35% of total premiums paid if surrendered during the third year.
- 50% of total premiums paid if surrendered between the fourth and seventh years.
- 90% of total premiums paid if surrendered during the last two years.
How will the new insurance rules benefit senior citizens?
Now, people above the age of 65 will be able to purchase new health insurance policies as the IRDAI has removed the age cap on buying health insurance policies, effective from April 1, 2024.
- The insurers may design the health insurance policy products specifically for senior citizens, students, children, maternity, and any other group as specified by the Competent Authority.
- This new decision by the IRDAI is aimed at creating a more inclusive healthcare ecosystem in India and encouraging insurance provider companies to diversify their offerings.
- The insurance regulatory body has asked the providers to introduce ‘tailored policies’ for specific demographics including senior citizens and also establish dedicated channels for handling claims and grievances.
- Also, health insurance providers are prohibited from refusing policies to individuals with severe medical conditions including cancer, heart or renal failure and AIDS.
Few other provisions of new insurance rules
Pre-existing Disease (PED) Waiting Period Reduced to 3 years
- As per IRDAI, the maximum waiting period for covering pre-existing diseases in health insurance has been reduced from 4 years to 3 years.
- This will enable policyholders to claim the treatment cost of pre-existing diseases, such as diabetes, hypertension, etc., after serving a maximum waiting period of 3 years.
- Moreover, it will prohibit insurance companies from rejecting PED claims after 3 years.
Specific Disease Waiting Period Reduced to 3 years
- The IRDAI has also reduced the maximum waiting period for specific diseases/ procedures, like joint replacement surgery, under health plans from 4 years to 3 years.
- This will enable people to file health insurance claims for listed diseases/ procedures after waiting for a maximum of 3 years.
No Sub-Limits on AYUSH Treatment
- IRDAI has removed sub-limits on AYUSH treatments.
- With this guideline, policyholders will be able to claim the cost of treatments availed through Ayurveda, Yoga, Naturopathy, Siddha, Unani and Homeopathy systems of medicine up to the sum insured limit.
The moratorium Period Reduced to 5 years
- As per the latest IRDAI notification, the moratorium period in health insurance has also been cut significantly from 8 years to 5 years.
- This prohibits insurance companies from rejecting claims based on non-disclosure of pre-existing diseases or misinterpretation after 5 years of continuous coverage unless it is a case of fraud.
No More Indemnity-based Policies
- The IRDAI has directed insurers to issue only benefit-based policies to cover hospitalization expenses and prohibited them from introducing indemnity-based policies.
- This will ensure that a fixed sum is paid to policyholders upon the diagnosis of a covered disease.
Multiple Claims Across Various Insurers
- The insurance regulator has also allowed people with benefit-based policies to file multiple claims with several insurers.
- This will ensure more flexibility and wider options for policyholders when diagnosed with a disease.
Insurance sector in India
India is projected to become the 6th largest insurance market by 2032.
- In terms of total premium volumes, it is the 10th largest market globally and the 2nd largest of all emerging markets, with an estimated market share of 1.9%.
- It is expected that premiums will grow by an average 9% p.a. (in real terms) over the next decade.
- India is the 14th largest Non-Life Insurance market globally.
- Ayushman Bharat PM-JAY is the largest health assurance scheme in the world and is funded by the Government.
India is poised to emerge as one of the fastest-growing insurance markets in the coming decade. This growth is driven by various factors:
Favourable Demographics
- 68% of India’s population is young and 55% of its population is in the age group of 20-59 (working population) in the year 2020 and is estimated to reach 56% of the total population by 2025.
- These point towards a young insurable population in India
Wide middle-class expansion
- By 2030, India will add 140 Mn middle-income and 21 Mn high-income households which will drive the demand and growth of the Indian insurance sector.
Digital behaviour patterns
- Customers are now starting to prefer digital modes for their insurance needs – 73%/62% of customers preferred the online mode.
- Agents’ ease with digital tools has also grown, with 63% of agents comfortable with video-calling clients and >50% amenable to virtual renewals.
- India is the 2nd largest Internet user market. ~1 Bn Internet Users by 2026.
Pandemic-related shift in demand patterns
- COVID has expedited digital adoption and 67% of agents felt customers are more willing to use portals/apps post-COVID.
- Further, the pandemic increased the insurance penetration rate and triggered awareness of insurance and demand for protection products, especially health insurance
Government Initiatives for the insurance sector
AB PM-JAY (world’s largest health assurance scheme): 230+ Mn beneficiaries have been provided Ayushman cards, and over 44 Mn hospital admissions have been authorised through a network of 25,969 empanelled healthcare providers, including 11,700 private hospitals (9th Mar 2023)
Pradhan Mantri Suraksha Bima Yojana: 313 Mn beneficiaries have been enrolled under the scheme, and more than 1 lakh claims have been disbursed (30 Nov 2022)
Pradhan Mantri Jeevan Jyoti Bima Yojana: 144 Mn beneficiaries have been enrolled under the scheme, and more than 6 lakh claims have been disbursed (30 Nov 2022)
Pradhan Mantri Fasal Bima Yojana (risk coverage against crop damage), is the world’s number one crop insurance scheme in terms of farmer applications enrolled and is also the world’s 3rd largest crop insurance scheme in terms of gross premium.
Read: Evolution of Insurance in India (IRDAI)
Conclusion
The highly anticipated new rules aim to protect policyholders’ interests while facilitating speedier responses by insurers to the demands of expanding markets, facilitating easier commercial dealings, and increasing insurance penetration.
The final goal is to encourage insurers to follow good governance practices when developing and setting the cost of their products.
-Article by Swathi Satish
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