IRDA allows banks to act as insurance brokers

Insurance Regulatory and Development Authority (IRDA) has allowed banks to act as brokers and sell products of more than one insurer so as to increase the penetration of the sector across the country.

There is no capital requirement for insurance broking business carried out by banks, according to IRDA (Licensing of Banks as Insurance Brokers) Regulations, 2013.

To qualify for the license, each bank will have to have the principal officer, an officer of general manager or equivalent category, who is appointed exclusively to carry out the functions of an insurance broker.

The license, once issued, will be valid for three years from the date of issue, it said, adding that the renewal of license can be applied 30 days before its expiry.

Every insurance broker will, before the commencement of the business, deposit and keep deposits with any scheduled bank as sum of Rs 50 lakh, it said.

The business of the insurance broker will have to be carried out in the such a manner that not more than 50 percent of the premium emanates from any one client.

“Not more than 25 per cent of insurance handled by the insurance broker in any financial year is placed with the insurance company within the promoter group, separately for life and general insurance business” IRDA said.

It also said the calculation of non-Indian interest in the applicant company shall be as per the limits applicable to the banking sector as decided from time to time by the government or the Reserve Bank.

While The Reserve Bank of India’s (RBI) approval is required for banks to become brokers, IRDA is of the opinion that in case of any dispute arising out of insurance transactions, its jurisdiction should prevail. It added that the laws applicable to insurance contracts shall be enforced and information in this regard shall be furnished to the RBI.

 

Irda Amends Norms on Health Insurance

Just a couple of days after standardisation guidelines for the health insurance  sector became effective, the Insurance Regulatory and Development Authority announced some amendments on 3 July 2013.

Of the 46 standardised terminologies for health insurance, the regulator has revised 19. Some changes just rectify typographical or grammatical errors.

For instance, the original definition of ‘unproven/experimental treatment’ missed a ‘not’, changing the scope of the rule. The revised definition now reads: “Treatment including drug experimental therapy which is not based on established medical practice in India, is treatment experimental or unproven.”

The amended guidelines also have a few major additions and omissions. The definition of ‘dependent child’ has been deleted from the list of standardised terminologies. So, insurers are now free to interpret this in their own way.

Under the new norms, an establishment registered with the local authorities does not have any minimum in-patient bed requirement. The requirement of having at least 10 in-patient beds in towns (with a population less than 10 lakh) and 15 inpatient beds in other places is mandatory for unregistered hospitals only.

The definition of ‘medical practitioners’ has been expanded to include people registered under the Central Council of Indian Medicine or the Central Council of Homoeopathy or any similar council set up by the government. Portability has also been redefined to exclude switching of plans with the same insurer.

Relaxations have been made for maternity expenses or treatment. Maternity expenses would now mean any medical treatment or expense traceable to childbirth, including caesarean sections during hospitalisation and lawful abortions during the policy period. Earlier, the benefit was restricted to two deliveries or abortions either during the policy term or lifetime of the insured.

On the flip side, expenses incurred before or after deliveries as well as abortions have been excluded from maternity expenses. The term ‘newborn baby’ now includes adopted children.

 

 

 

 

Despite its immense potential in India, health insurance is in an anaemic state.

India is already boldly taking its place as one of the leading healthcare markets in the world, forecasted to be one of the top 10 pharmaceutical markets by 2017, with a projected market size of $25 billion, and a CAGR between 11-13 per cent for the period 2012-17.

A sustainable health insurance system is absolutely critical.

Fortunately, this process is underway. As of 2010, over 300 million people (25 per cent of the population) had some form of health insurance – an astonishing 445 per cent increase from 2004.

Even more astonishing are World Bank estimates that by 2015, 50 per cent of the population (or approximately 630 million people) will be able to access a health insurance programme.

But India’s nascent and fragmented insurance market is facing serious issues that require thoughtful solutions.

NEED FOR CHANGE

Priority 1: Responding to competition with innovation: The arrival of new entrants, coupled with an increasingly aware consumer population has placed a burden on companies to manage – and differentiate – their portfolio.

The growth of India’s health insurance industry has brought forth some compelling business models and significant opportunities.

But, as patients across India will attest, though there is a myriad of options in insurers, there is almost no variation across offerings.

Success will require a proactive approach to capturing new customers.

Priority 2: Building an appropriate pricing structure: Across all levels of the population, people are beginning to understand that insurance is a necessary step to ensuring the affordability of better standards of care. This has resulted in a relatively high “willingness to pay”. The onus, then, is on health insurance companies to build relevant, appropriate pricing models.

Priority 3: Stabilising and legitimising the claims process: Health insurance companies today (across all segments) are burdened with inconsistent relationships with unregulated stakeholders — from providers to patients.

The Secretary-General of the General Insurance Council estimates that 15 per cent of insurance claims processed in India are fraudulent (patient fraud, inflated medical bills, underwriting lapses, process gaps, and so on). Even more shocking is the estimate that around Rs 800 crore is lost on inaccurate or falsified claims – every year.

MOVING FORWARD

Both, existing and new players need to acknowledge that there is huge gap between the objective of universal health insurance in India and the current state.

Without doubt, the industry needs a careful balance of stabilisation and innovation across the board as well as a continued focus on managing public perception. Efforts are also needed to consolidate data across stakeholders and transform it into accurate, actionable information and customer-focused products.