The Insurance Regulatory and Development Authority of India (IRDAI) is planning to bring about a policy change in the operation of life insurance companies, allowing them to offer health insurance policies to buyers.
According to IRDAI, this could reduce health insurance premiums and increase its reach among many Indians.
A recent report by RedSheer Consulting had revealed that life insurance accounted for around three-quarters of the overall $131 billion insurance market in India, at $66.5 billion, and health insurance barely 4 .7 billion.
What does the IRDAI envisage?
An internal IRDAI committee has been discussing the proposal for weeks, and a draft directive on it is expected to be released soon, according to a report in Livemint. This draft directive, if approved, would allow life insurance companies to sell indemnity health insurance products, or more commonly known as mediclaim products.
“With captive customers, larger distribution networks and higher available liquidity, life insurers are well positioned to offer health insurance products to a wider population at better rates,” Livemint said, citing a source.
Why is such a guideline being considered?
It is understood that initially, life insurers could offer health insurance policies, the premium of which is 5 to 10 percent lower than that offered by non-life insurance companies. That said, IRDAI could also allow these life insurance companies to sell existing mediclaim products from other companies, or allow them to design and distribute their own mediclaim policies.
“Life insurance companies inherently get more customers than health insurers in the retail space, which will help them cover more people with medical insurance at more affordable premiums,” the report said.
The proposal could also allow life insurance companies to design, price and sell mediclaim products, which could lead to a competitive premium for end customers.
Earlier in 2016, IRDAI banned life insurance companies from offering indemnity health insurance products, but after receiving various representations from industry players, IRDAI agreed to form a committee to review the practicality of these policies.