Key developments that changed the face of insurance industry in 2021

We hit highs and lows in 2021 and are now starting a new year. After the emergence of COVID-19 brought the world to a standstill, rules and regulations have been constantly changing to suit a world where the pandemic is spreading. Previous COVID waves have given rise to many uncertainties, and the insurance industry is working hand in hand with these regulations to help combat these uncertainties. These developments have also determined the growth direction of the insurance industry in a significant way. IRDAI has recognized the challenges that COVID-19 has brought to the industry and has redefined the guidelines to make it more customer supportive.

While 2020 saw some really important changes that dominated the industry, 2021 also followed suit, particularly in the health insurance sector. Apart from focusing on the general welfare and protection of the insured, these regulations have also taken into account technological and digital advancements in policies.

Here’s a quick summary of everything you need to know about the developments that changed the course of the insurance industry in 2021.

IRDAI encourages non-life insurance companies to offer home treatment coverage

Home treatment or home care has become a big part of insurance planning after the coronavirus hit the world. The need was further accelerated by the severe shortage of beds that we saw during the second wave. Home treatment occurs when a patient is treated at home while their condition requires hospitalization according to a medical practitioner. This may be due to lack of family or due to the patient’s co-morbid condition.

The Insurance Regulatory Authority has included the need for home treatment coverage in the latest guidelines. The regulator encourages uninsured life insurers to offer home care or home treatment as a new supplement or to their existing policies. The cover can be added to the existing policy by charging an additional premium for the remaining period of time.

Telemedicine coverage

The coronavirus has brought about an era of social distancing and limited movement in order to reduce the risk of exposure. This hailed telemedicine or online counseling as a reliable alternative to hospital visits, at least for the first line of defense. Telemedicine has not only helped COVID patients with the initial diagnosis, but it has also helped people with other illnesses as well. IRDAI has taken a positive step in this direction by covering telemedicine fees along with outpatient coverage in a health insurance policy.

Extension of the deadline for processing and issuing a paperless health insurance policy

Given the ongoing COVID situation, digital payment appears to be strong this year as well. IRDAI allowed health and general insurance companies to continue issuing health policies in electronic form without insisting on a physically signed proposal form until March 31, 2022. The insurance regulator allowed insurers to get policyholders’ approval digitally last year in September. Initially, the exemption for a hard copy of the signature was valid until March 31, 2021. Furthermore, in the wake of the second COVID wave, IRDAI extended until September 30, 2021.

With the new Omicron variant raising third wave concerns, this extension will prove to be a huge boon if lockdown restrictions are imposed again. Through the digital initiative launched primarily to provide consumers with an alternative option to purchase policy during the pandemic, there is now a strong need and demand for this to be a permanent option.

Standard insurance products in place with the most common features

IRDAI has taken into account the need for standard insurance products with some standardized features that meet a variety of different consumer needs. Travel and personal accident insurance products are also part of this guide.

COVID has emphasized the need for travel insurance like never before and so, IRDAI has issued guidelines for a standard domestic travel insurance product. This product is known as Bharat Yatra Suraksha and this product had to be introduced by general and health insurance companies from 1st July onwards. The product offers five plans that offer benefit- and compensation-based coverage. There will be one premium payment to be charged in advance. It provides hospitalization coverage due to accident in the range of Rs 1-10 lakh insured amount and accidental death coverage in the range of Rs 1 lakh to Rs 1 crore. Optional riders can also be attached to the policy. When offered as family cover, the insured amount chosen must apply to each family member individually.

Similarly, health and general insurance companies were required to offer a personal accident product from April 1 onwards. It has mandatory features such as benefits equal to 100% of the sum insured to be paid in the event of accidental death or permanent total disability within 12 months. There are guidelines regarding the percentage of the insurance amount to be paid in the event of partial disability. There are optional covers that can be added to this for temporary total disability, hospital expenses and education grant.

Apart from this, there are other standard products offered in the retail category, such as Bharat Griha Raksha, Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha to insure homes and commercial spaces against various risks.

Rules for public insurers on product design and pricing

IRDAI has produced draft guidelines intended to provide a framework for insurers to follow with regard to product design and pricing. The regulator said that when it comes to product development, products must be designed to secure policyholders’ interest and affordability. At the same time, you should also take care of evolving needs while covering risks accordingly. The regulator has classified general insurance products into retail and commercial products on the basis of who buys the product and/or on the basis of the amount insured.

Feasibility is a key factor to consider while pricing a product, according to the regulator. It states that insurers must take into account exposure, experience with claims, expenses, reinsurance, solvency requirements, and a reasonable amount of surplus. Even add-ons have to be priced in such a way that the product and add-ons are viable.

The regulator said, the higher risks should be insured by insurance companies at the same rate as reinsurers. But the insurance company can charge an additional premium to the rates guaranteed from the international market that is proportional to the additional risk coverage it offers. Also, it is not permitted to purchase Add-ons as a standalone product or separate insurance contract, regardless of any other product purchase. The total premium for all add-ons plus the premium under the optional covers included in the base product must not exceed one hundred percent of the premium for the base product. “The authority may fix less than one hundred percent of the base product premium on select products,” IRDAI said.

IRDAI allows more health products under use and file procedure

IRDAI has allowed general and health insurers to release four more categories of individual products, add-ons and health policy riders to be offered under a use-and-file procedure. These four new categories are – personal accident insurance, overseas travel insurance, domestic travel insurance and benefit-based health insurance products.

Under the Usage and File Rules, insurers are allowed to market certain products without IRDAI’s prior approval under certain circumstances. “With respect to personal accidents, ‘use and file’ of domestic and outbound travel products is only permitted if coverage provided under basic and additional covers or passenger covers is contingent on accident and/or travel as applicable,” IRDAI said in a statement. These new standards will apply to Products deposited from April 1, 2021 onwards.

(By Amit Shubra, Head of Health Insurance, Policybazaar.com)