With a continually increasing market size and growth of almost 20% every year, health insurance products have seen an improved uptake recently. This growth is largely attributable to government initiatives and health insurance schemes launched across India, as well as a general increased awareness and ease of purchase among the savvier urban population.
While various overseas health insurance offerings provide access to a range of wellness benefits – such as free or discounted fitness classes, gym memberships, spa and other alternate therapies, weight-loss consultations and programmes to cease smoking – offerings in India have traditionally been restricted to personal accident and hospitalisation cover.
Those in favour of including wellness and preventive benefits in insurance policies argue that this would improve policyholders' health and insurers' portfolios by significantly lowering the claims ratio. Preventive measures are widely believed to benefit the insurance industry as they help policyholders to avoid unnecessary treatment and hospitalisation, which in turn lowers insurers' costs.
The Insurance Regulatory Development Authority of India (IRDAI) (Health Insurance) Regulations 2016 (2016 health regulations) recognised and permitted general and health insurers to devise incentives and mechanisms to reward policyholders for continued renewals, favourable claims experience and preventive habits. The 2016 health regulations encouraged the consideration of wellness and preventive elements during product design, but also simultaneously imposed requirements on insurers to disclose such incentives and mechanisms upfront in a prospectus and policy document in accordance with the applicable product filing procedure and factor the costs of such services into the price of their health insurance products.
The IRDAI's Guidelines on Product Filing in Health Insurance Business (product filing guidelines), which were published on 29 July 2016, expand on the 2016 health regulations. Chapter VII of the product filing guidelines (Guidelines on Wellness Features/Benefits) provides the specific framework that insurers must follow when offering wellness features and benefits as part of their health insurance policies.
The product filing guidelines permit insurers to design wellness features with the objective of promoting the improvement and maintenance of good health and require the benefits under these features to be accrued at a rate which is declared upfront to policyholders (and not linked to a dynamic factor, such as interest rates). Further, insurers must specify the manner of redeeming the benefits under each wellness feature in the insurance product's policy wordings and prospectus, and disclose updated information on their website. Any errors or omissions in calculating the accrued benefit must be addressed through the insurer's in-house grievance redressal procedure.
In 2017, in the context of insurtech the IRDAI expressly recognised the role of wellness-oriented consumer technology in insurers' risk assessment and product design.
By way of a 7 December 2017 circular, the IRDAI set up a working group to examine innovation in insurance involving wearable devices to measure personal fitness and incorporating a healthy lifestyle, stating that:
it is important to understand technology trends and their various implications for insurance even while seeking to harness the potential and advantages… While encouraging innovation, the regulator must run alongside it, keeping in view the interests of policyholders.
The recently notified IRDAI (Health Insurance) (Amendment) Regulations 2019 (amendment regulations), published on 21 November 2019, amended the 2016 health regulations.
In relation to the nature of the wellness features, Regulation 19 of the 2016 health regulations permitted insurers to provide certain health-specific services (eg, wellness benefits) in addition to premium discounts. However, Regulation 19 prohibited insurers from promoting or offering (or offering any discounts on) products and services of third parties which were not their network providers.(1)
In particular, Regulation 19(i) specified the forms of health-specific services (including discounts of such services) that could be offered by such network providers – namely:
- outpatient consultations and treatments;
- pharmaceuticals; and
- health check-ups.
One of the key amendments introduced by the amendment regulations concerns the existing standards for wellness benefits offered under health insurance policies. In this regard, Regulation 19 has been replaced with the following wording: "insurers may endeavour promoting wellness amongst policyholders of health insurance as per the guidelines as may be specified by the Authority from time to time."
Due to the recently notified amendment, the position of third-party products and services offered by insurers under the wellness features of their products remains uncertain.
On 7 November 2019 the IRDAI issued the Draft Guidelines on Wellness and Preventive Features/Benefits (exposure draft), which is proposed to supersede the present standards specified in Chapter VII of the product filing guidelines on wellness and preventive benefits.
The exposure draft proposes to consolidate the provisions identifying wellness and preventive benefits under the 2016 health regulations and the product filing guidelines into one set of applicable guidance and "enhance the scope of services offered under wellness and preventive features/benefits of health insurance products", while ensuring that policyholders can make informed choices.
Main changes proposed under exposure draft
The key amendments proposed in the exposure draft are as follows.
Regulation 19 of the 2016 health regulations specified that no discount will be offered on any third-party service or merchandise. Further, the regulatory framework permitted insurers to offer discounts only on the insurance premium that they charged or on specific health services (eg, diagnostics, consultations and pharmaceuticals) offered by their network providers. However, Regulation 19 has now been deleted by the amendment regulations. As such, the exposure draft appears to relax the previous restriction on using only network providers by including the words "or other empanelled hospitals / service providers", which may encompass broader forms of wellness incentives. Further, in addition to the discounts on insurance premiums, insurers are expressly permitted to provide an increase in sum insured at the time of renewal as part of their wellness feature, provided that such increase is independent of any cumulative bonus offered under the insurance product.
Further, while the 2016 health regulations previously specified that "no policy of insurance shall promote or offer the products and services of third parties who are not Network Providers", products and services offered by a third party are expressly recognised under the exposure draft. However, the exposure draft merely states that "insurers shall not promote products or services of any particular [third-party] service provider".
While insurers remain responsible for any errors or omissions in the calculation of accrued benefits under their wellness features, they must state that they will not be liable for any defects or deficiencies on the part of any service provider. Insurers are also responsible for ensuring that service providers have appropriate mechanisms in place to discharge their obligations under their wellness features.
Another significant change concerns consumables offered under wellness features. While the product filing guidelines presently state that the "use of protein supplements and other such consumable health boosters shall not be considered to be part of a wellness feature", the exposure draft permits insurers to offer redeemable vouchers to obtain protein supplements and other consumable health boosters or supplements.
Under the exposure draft, insurers are also prohibited from receiving any consideration for offering a third party's products or services. Likewise, insurers cannot pay third-party service providers for anything other than the monetised value of the rewards points redeemed by policyholders. All third-party merchant-wise and product-wise payments must be disclosed in the insurer's annual public disclosures.
In relation to advertising a wellness feature, the product filing guidelines presently require insurers to ensure that the insurance benefit offered under the product is highlighted and that the wellness features do not dominate. However, the exposure draft sets out a comprehensive set of standards for advertising products with wellness features, requiring insurers to also disclose the corresponding price factor wherever the wellness features of a product are advertised. They must also disclose in all ads the manner of accruing and redeeming wellness benefits for each member in a floater policy.
Further, insurers are prohibited from promoting the products or services of any particular third-party service provider and cannot publish their trade names or logos in any of their insurance ads.
These changes proposed under the exposure draft significantly broaden the scope of wellness and preventive features that are presently permitted to be offered by general and health insurers in India. However, in relation to the scope of wellness features that are offered by insurers, the standard mediclaim policy proposed under the IRDAI's Draft Guidelines on Standardisation of Individual Health Products of 19 February 2019 (draft mediclaim guidelines) will also be of significant relevance.
Due to the lack of standard health insurance products in the insurance industry, and in order to curb prospective customers' confusion, the IRDAI recently proposed the introduction of a basic and standardised individual mediclaim policy offering fixed cover to customers. The draft mediclaim guidelines set out the specifications for the proposed mediclaim policy, including the basic cover to be offered by each insurer. Paragraph 15 of the draft mediclaim guidelines proposes to offer wellness incentives as part of the basic cover available to all policyholders, stating:
it is considered essential that a wellness and preventive program that incentivises the targeted market segment to start living healthier shall also be incorporated. Accordingly, to enable the individuals to lead longer, healthier and more productive lives, the following wellness features shall be made available to all the insured persons.
In this regard, the IRDAI's standardised mediclaim policy proposes to provide policyholders with access to a host of wellness incentives – namely:
- free check-ups – periodic consultations and health check-ups with network providers, at least annually;
- disease management – follow-up care and allied services for overall disease management of policyholders post hospitalisation;
- fitness activities – a reward mechanism to incentivise policyholders to follow a fitness regime; and
- outpatient department consultations – periodic or certain trigger-based outpatient consultations and treatments for policyholders.
While the draft mediclaim guidelines are still under deliberation, they are important as every general and health insurer will need to offer the standardised mediclaim policy and the wellness benefits offered thereunder. This may also shape other wellness offerings in the Indian insurance market.
There appears to be a significant focus on rewarding policyholders for preventive and wellness habits, with a specific focus on forthright disclosures made in policy documents and advertising material.
The exposure draft sets out detailed guidelines on wellness and preventive features and benefits and proposes to expand the scope of services that are presently offered under health insurance products. While it remains to be seen how the gamut of wellness features presently offered by insurers under their products will adapt according to the proposed relaxation of regulatory framework, the IRDAI still has the power to review market practices and reject wellness features proposed by insurers if they are against policyholders' interests or not aligned with fair market conduct. The exposure draft is still in the draft stage, with comments from various stakeholders having been submitted.
With the changes already introduced under the amendment regulations and the expected issuance of the draft mediclaim guidelines, it appears that a more comprehensive wellness regime will shortly be introduced in the Indian insurance market.
(1) Regulation 2(k) of the IRDAI (Third-Party Administrators – Health Services) Regulations 2016 defined a 'network provider' as a "hospital or health care provider enlisted by an insurer, [third-party administrator] or jointly by an insurer and [a third-party administrator] to provide medical services to an insured either on payment or by a cashless facility".
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