Insurance Regulatory and Development Authority of India (Irdai) on Monday came out with the exposure draft on color coding of individual products of health insurance business. This move will enable policyholder to understand the level of complexity while buying the health insurance products.
The insurance regulator stated that to make product choice easier to the customer it is considered important to introduce the system of color coding in respect of all the individual products under the category of health insurance business. The color codes that can be allotted are green, orange and red.
According to the exposure draft, color code green shall signify that the product offered is a simple product, easy to understand and comprehend. Orange color shall signify that the product offered is moderately complex. While the color code red shall signify that the product offered is complex when compared with both green color coded and orange color coded products.
With more and more number of people buying health insurance policies due to the ongoing pandemic, this move by the regulator will help them understand the health products in a better way, says market participants. In the current financial year till August, general insurers have underwritten premium of Rs 22,903 crore as compared to Rs 20,274.11 crore in previous financial year, a growth of 13%. Health insurance has a market share of 31% in the overall premiums for non-life insurance companies.
Every individual health insurance product offered by general and health insurance companies shall carry a diagrammatic representation of the color coding to indicate the level of complexity of the product. The diagrammatic representation of the product shall be decided based on the score arrived for a given product on a scale of 0 to 6.
There will be seven parameters to be considered for attaining the score such as number of optional covered offered, percentage of copay, number of months of waiting period and deductibles, among others. All the seven parameters shall be given an equal weightage of 14.28%.
For example, a score of 0.15 is given for every, one month of waiting period subject to a maximum score of 6. In case of multiple waiting periods, the highest of the months shall be taken. If the maximum waiting period in a health product is 18 months, then the score shall be 2.7. In the last few months insurance regulator has announced standard products for health insurance to deepen insurance penetration in India. The last date to submit the comments to Irdai is 15th October 2020.