All you need to know about IRDAI’s new health insurance rules

The regulator has mandated health insurers to provide cashless authorisation within one hour, and final authorisation within three hours of intimation
This image is used for representational purposes only.
This image is used for representational purposes only.Photo | Pixabay

MUMBAI: The Insurance Regulatory and Development Authority (Irdai) recently came up with a series of changes in the health insurance sector that will go a long way in improving service standards for policyholders.

The regulator has mandated health insurers to accept/reject a cashless claim immediately and latest by within one hour, and settle such a claim on discharge within three hours, else bear the additional cost if any. These game-changers have many benefits to policyholders as they significantly reduce the stress and anxiety associated with claim processing during hospitalisation.

This is also the harbinger for 100% cashless claim settlement in a time-bound manner and a major step in streamlining the real ordeal of both hospital admission and discharge. The master circular comes into effect immediately.

The new master circular repeals 55 previous circulars.

Under the new norms, an insurer can’t repudiate a claim sans the approval of its claims review panel. For claim settlement, the insurer and the third-party administrator must collect documents from hospitals and not from the insured.

Also, policyholders with multiple health policies can select the policy under which they make the claim wherein the primary insurer will coordinate the settlement of the balance amount from other insurers. The new rules ask insurers to reward policyholders with no claims during the policy period by offering either an increased sum insured or discounted premium amounts.

It also says policyholders can receive premium refund for the unexpired policy period if one cancels the policy mid-way and that all individual health policies are renewable and cannot be denied on the basis of previous claims, except in cases of fraud, non-disclosures, or misrepresentation. And no fresh underwriting is required for renewal policies unless there is an increase in the sum insured.

Also, stricter timelines are imposed on portability requests via the Insurance Information Bureau of India portal. The circular also asks insurers to include a customer information sheet as part of the policy document explaining all customer-facing details such as the policy type, sum assured, coverage details, exclusions & deductibles and the waiting period.  

Directives & Benefits

According to the circular, a cashless claim demand has to be accepted/rejected immediately and maximum within one hour and has to be settled within three hours of the discharge notice. More importantly if there is a delay beyond the mandated three hours, the additional amount, if any, charged by the hospital to the customer should be borne by the insurer from the shareholder’s fund. In the event of the policyholder’s death during treatment, the insurer shall immediately process the request for claim settlement.

Under the new rules, a hospital can’t hold you up waiting for insurance authorisation before discharge. This is a big relief as normally the biggest pain for any patient and her attendant in a hospitalisation is the discharge process. The penalty clause on the insurer for delayed authorisation will make the staff at both the ends more responsible to their employers first and to themselves second and more so to the customer.

The direction also mandates the insurer to have the necessary systems and procedures in place by July 31 to ensure a smooth transition to the new regulation. This also allows them to have physical help desks in hospitals to handle and assist with cashless claim requests. Additionally, they can give pre-authorisation to policyholders digitally, ensuring a smoother and faster claim settlement process.

The circular also mandates hospitals to immediately release the mortal remains.

The circular also directs insurers to provide a one-month grace period for annual renewal of health policies and protect benefits under policies renewed within that period.

It also emphasises on the policyholder’s right to a premium refund for the remainder of the policy period if she cancelled the policy prematurely or reward her with higher sum assured or lower premium in case of no claims in a year. The circular also mandates health insurers to pay the ombudsman’s award within 30 days.

Benefit of cashless claims

Cashless claims offer significant advantages allowing the policyholder to receive treatment at empanelled hospitals without needing upfront payments, as the insurer settles bills directly with the hospital.

Claim settlement data

According to the latest Irdai data, the claim settlement ratio for the private sector stood at 98.02 in volume for FY24, marginally down from 98.64 in FY23, and the ratio in value stood at 93.80 and 94.69, respectively.

According to the General Insurance Council chairman Tapan Singhel, the health insurance sector has collected a little over R1,00,000 crore in premium in FY24, reflecting a robust 20% growth from R81,997 crore in FY23, thus making it the single largest business verticals for the insurers netting in 37.5% of the top-line share. With over 500 million customers, which translates to around 38%penetration, up from 37% in FY23, the new policy changes will positively impact at least these many people.

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