Health insurance policies to become standardised and easier to understand: IRDAI

With this move, IRDAI aims to bring in uniformity and greater transparency to insurance contracts

Health insurance policies to become standardised and easier to understand: IRDAI

The IRDAI on January 10, 2020 issued a draft proposal that looks to standardise and simply policy wording of standard health insurance plans. The insurance regulator aims to bring in uniformity and greater transparency with respect to insurance contracts.  

The IRDAI’s draft proposal states, “The objective of the guidelines on 'Standardization of General Clauses in Health Insurance Policy Contracts' is to standardise the common general clauses incorporated in indemnity based Health Insurance (excluding Personal Accident (hereinafter called as PA) and Domestic /Overseas Travel) products covering Hospitalisation, Domiciliary hospitalization and Day care treatment in order to simplify the wordings of general clauses in the policy contracts and ensure uniformity and greater transparency.” 

Once approved, these guidelines will be applicable to all health insurance companies providing indemnity based coverage (for individuals as well as group insurance) including that for hospitalisation, day care treatment, and domiciliary hospitalisation.  

Related: Health Insurance 101 

What are the guidelines? 

As per the draft proposal, insurance companies will include/ comply with standardised policy wording for the following key parameters: 

1. Disclosure of Information 

The policy shall be void and all premium paid thereon shall be forfeited to the Company in the event of misrepresentation, misdescription or non-disclosure of any material fact

To make an informed decision regarding underwriting risk, the insurance company may seek any essential or relevant information through the proposal form. Falsifying, misrepresenting or hiding any crucial facts will terminate the insurance contract. 

2. Claim Settlement 

The insurer has to settle or reject a claim, as the case may be, within 30 days from the date of receipt of last necessary document. In the case of delay in the payment of a claim, the insurer will be liable to pay penal interest from the date of receipt of last necessary document to the date of payment of claim at a rate 2% above the bank rate. 

This will push insurance companies for speedier resolution of insurance claims and also give a truer picture of the health insurance claim settlement ratio of each insurer, enabling customers to make an informed choice. 

3. Renewal of Policy 

The Policy shall ordinarily be renewable except on grounds of fraud, moral hazard, or misrepresentation by the insured person. Renewal shall not be denied on the ground that the insured had made a claim or claims in the preceding policy years. Also, at the end of the policy period, the policy shall terminate and can be renewed within the grace period to maintain continuity of benefits without break in policy. Coverage is not available during the grace period. 

The standardised policy wordings safeguard the interest of the policyholder, ensuring that the insurance benefit is not withdrawn by the insurance company on any grounds not clearly stated within the policy document. 

Related: Why do you need health insurance? 

4. Nomination 

The policyholder is required at the inception of the policy to make a nomination for the purpose of payment of claims under the policy in the event of the death of the policyholder. 

Applicants will have to clearly specify a nominee for the health insurance policy at the time of application so as to ensure there are no disputes arising from the claim in case of pay-out of accidental death benefit.  

5. Complete discharge 

Any payment to the insured person or his/ her nominees or his/ her legal representative or to the hospital/nursing home or assignee, as the case may be, for any benefit under the policy shall in all cases be a full, valid and an effectual discharge towards payment of claim by the company to the extent of that amount for the particular claim. 

With a view to hold insurance companies responsible for adequate compensation for the insurance claim as well minimise disputes regarding a valid settlement, the draft wordings look to protect the interest of the consumer. 

Related: How Mediclaim differs from a health insurance policy 

What are other recommendations? 

For policies where premium is paid in instalments (monthly, quarterly, or half-yearly) by the policyholder usually through an online premium payment option, the IRDAI has invited opinion form the insurance agencies to specify the grace period for making premium payment to be included in the new proposed guidelines. 

The draft states, “Grace period of (Insurer to fill as per product design) days would be given to Pay the instalment premium due for the Policy.” 

IRDAI has asked insurance companies to study the policy wordings and share their opinion. Are you aware of these unique features offered by different health insurers? 


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