The Insurance Regulatory and Development Authority of India (IRDAI) is planning to make a policy change in the operation of life insurance companies, thus allowing them to offer health insurance policies to buyers.
According to the IRDAI, this could reduce health insurance premiums and increase its outreach to many Indians.
A recent report by RedSheer Consulting had revealed that life insurance contributed roughly three quarters of the overall $131 billion insurance market in India, at $66.5 billion, and health insurance a mere $4.7 billion.
What Is IRDAI Considering?
An internal committee of the IRDAI has been discussing this proposal for weeks, and a draft guideline regarding the same is set to be issued soon, according to a report in Livemint. This draft guideline, 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 disposable cash, life insurers are well-positioned to offer health insurance products to a larger population at better rates,” Livemint quoted a source as saying.
Why Is Such A Guideline Considered?
It is understood that initially, life insurers could offer health insurance policies, whose premium is 5-10 per cent lower than that being offered by non-life insurance companies. That said, IRDAI could also allow these life insurance companies to sell existing mediclaim products of 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 get more people covered under 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 competitive premium for the end-retail customers.
Earlier in 2016, IRDAI had barred life insurance companies from offering indemnity health insurance products, but after receiving various representations from industry players, IRDAI agreed to form a committee to look into the practicality of such policies.