How IRDA's recent health insurance reforms will benefit you
22 Jan, 2014 01:01 PM
IRDA is trying to streamline the definitions so that it becomes simpler and process wise everybody has clarity on what the claims etc are, personal finance expert, Anil Rego, Right Horizons said.

In an interview to CNBC-TV18, Anil Rego, Right Horizons spoke about recent reforms announced by IRDA in health insurance space.

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Below is the verbatim transcript of Regoi's interview with CNBC-TV18.

Q: Insurance Regulatory and Development Authority (IRDA) has amended certain guidelines to make the health insurance sector more transparent. Could you take us through what the benefits would be for policy holders - both new & existing?

A: The IRDA is trying to streamline the definitions so that it becomes simpler and process wise everybody has clarity on what the claims etc are. So, number of changes that have come up; one, in terms of definition on deductibles wherein it defines how deductibles is wherein whatever is the amount of a person's claim there is certain amount which is reduced from it. Therefore, if deductible is Rs 1,000 and claim is Rs 3,000 then he is paid out Rs 2,000. On the other hand if claim is Rs 1,000 then he is not paid anything. It also mentions how a deductible has to be claimed, what will be the amount whether it is annually or on per claim basis.

The second point is of co-payment wherein a certain percentages paid by the policyholder and there also the change that has come about is, any co-payment is excluded from the sum assured.

There is another change in terms of portability; portability is basically where one can move policy from one company to the other. It also allowed moving it between policies of the same company itself. That has been excluded.

There is a definition of hospitals being relaxed and any hospital, which is registered under the Clinical Establishment Act of 2010 is there, couple of changes in terms of maternity, it is expanded a little bit including complicated procedures etc and also today lawful terminations of pregnancies and there is another change which has come in terms new born definition also interestingly allows adopted children.

Therefore, a lot of changes are coming in and definitions are in place. It makes it easier for the customer to understand and also no misuse from the insurance company.

Caller Q: Is it a good idea to invest in debt funds currently?

A: We are all used to fixed deposit where a certain coupon is there and need to keep it till maturity and there is no change.

In the case of Gilt funds and income funds, they are buying bonds and they are tradable and they can also be exited at any point of time. Therefore, the current value of the bond comes into play, which brings in; apart from the coupon you also have interest rate risk. So, if interest rates were at 10 percent and come down to 9 percent then your bond becomes that much more valuable and if it is over five years then you are getting 1 percent additional interest for whole five years. So, the longer the tenure of bond, the bond value actually goes up. So, that is a simple principle of wherein interest rates and bond value have an inverse relationship.

Mutual funds need to disclose net asset value (NAV) on daily basis and they need to value it on a daily basis. So, depending on interest rates moving up and down, if it moves up then that is where you start seeing negative and if it moves down you start seeing positives. However, if you have kept it over five-seven year period over the tenure or the duration of fund, you will probably get the same but in between you will see some bit of volatility on the bond values and the NAVs because of interest rate risk.

Caller Q: Require health plan for myself and my wife. Which plan can I opt for?

A: You can start looking at a cover in which both of you are covered, which is called floater and with the same assured you can have both of you covered and it will reduce your premium versus having two different policies.

You have choice options like if you want to be conservative and you want public sector undertaking (PSU) type of thing then you have all the United Insurance, the Oriental Insurance of this world then you have good comprehensive products like Apollo and Max but they may end up being little costlier so you pay a premium for feature rich options on the products or you can even go to typical Indian institutions like HDFC and ICICI of this world.

There are a lot of sites where you are able to compare premiums and that is the best way of choosing your policy.
Source : Money

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