Life insurers may get to sell health covers
MUMBAI: India’s insurance regulator is planning to allow life insurance companies to offer full-fledged health insurance policies, two people with direct knowledge of the plans said, in a move that will likely reduce premiums and increase access to affordable health cover.
An internal committee of the Insurance Regulatory and Development Authority of India (Irdai) has been discussing the proposal over the past few weeks, and the regulator is likely to issue draft guidelines allowing life insurers to sell indemnity health insurance products (commonly known as mediclaim policies), said the two people, both of whom spoke on the condition of anonymity since the rules are yet to be formalized. “Life insurance firms inherently get more customers than health insurers in the retail space, which will help them get more people covered under medical insurance at more affordable premiums,” one of the two people said.
According to India’s Economic Survey 2021-22, life insurance penetration in the country stood at 3.2% in 2020, rising from 2.82% in 2019. But the penetration of overall non-life insurance (which includes health insurance, motor insurance, fire, and industrial insurance) is abysmally low at 1%, way behind the global average of 4.1%.
“With captive customers, larger distribution networks and higher disposable cash, life insurers are well-positioned to offer health insurance products to a larger population at better rates,” said the second person.
Life insurers in India have at least 2.5 million individual agents, tie-ups with over 500 corporate agents, a huge bancassurance channel, a large network of brokers, and thousands of their own physical branches where they sell insurance policies. Therefore, Irdai’s move may not only help enhance the penetration of health insurance in the country, but also raise competition among health insurers .
“Initially, to be able to encourage more customers, life insurers may offer health insurance policies whose premium could be 5-10% lower than the average price of basic health insurance policies by non-life insurers at present,” said the first person.
Initially, Irdai may allow life insurers either to sell existing mediclaim products of other firms, or allow them to both design and distribute mediclaim policies. Once life insurers are allowed to design, price and sell mediclaim products, the primary competition will be between life and health insurers, which may lead to a friendlier premium regime for customers.
Currently, basic mediclaim products for a sum insured of ₹2 lakh cost an annual premium of ₹5,000-7,000 for an adult without any pre-existing ailment and aged 18-50. This premium range may get lowered by 5-10% once Irdai implements the proposal.