Decoded: IRDAI's new health insurance rules on quick cashless approvals, higher penalties for non-compliance

IRDAI specifies turnaround time for cashless authorisation, final settlement

Soon, health insurance companies will have to take a call on cashless authorisation requests for policyholders’ treatment within an hour, with the Insurance Regulatory and Development Authority of India (IRDAI) releasing a master circular offering clarity on operational matters.

Insurance companies usually authorise an ad-hoc amount as soon as the cashless application is received through hospitals. The final claim settlement takes place at discharge, after the hospital shares the bills and supporting documents.

At present, the turnaround times on cashless authorisation and claim settlement are based on the individual companies’ board-approved policies.

Quicker claim settlement at discharge

The IRDAI has also asked insurance companies to approve the final cashless authorisation at discharge within three hours of receiving the bills. “If there is any delay beyond three hours, the additional amount, if any, charged by the hospital shall be borne by the insurer from shareholder’s fund,” the circular says. In the case of the policyholder’s death during treatment, the insurers will now be required to allow the release of mortal remains from the hospital immediately. Insurers have time till July 31 to put the required infrastructure in place to facilitate these changes.

Also read: ‘Cashless everywhere’ insurance: The many challenges it faces and how the General Insurance Council aims to overcome them

Discounts for claim-free years

Unlike motor insurance, where a no-claim bonus results in direct reduction in renewal premiums, health insurers typically hike the sum insured at no extra cost if the policyholder does not file claims. The IRDAI has now asked health insurance companies to provide policyholders an option to either pick an increase in sum insured or discount on renewal premium in such cases. This will help policyholders who find renewal premiums unaffordable due to sustained rise over the years, particularly since COVID-19.

Also read: Moneycontrol-SecureNow Health Insurance Ratings: Your guide to picking the right policy

Cancellation of health policies

Now, you can cancel your health insurance policies any time during the tenure (typically one year, unless you have paid premiums for two or three years), after issuing a seven-day notice to your insurer. You will be entitled to a refund of proportionate premium for the balance period in such cases.

One-time renewal option for withdrawn products

This is the chief grouse of many health insurance customers, senior citizens in particular, who are covered under older health insurance policies. Insurance companies often withdraw their policies based on claim experience or replace them with newer products, which are then offered to existing customers at renewal instead of their older policies.

While insurers claim the aim is to offer more benefits and wider coverage to policyholders, the proposition comes with higher premiums, which puts the updated version beyond the reach of many.

The IRDAI has not come up with any lasting solution to this issue. However, it has asked insurers to offer a one-time option to renew the same policy if the renewal period falls within 90 days of the product withdrawal.

Also read: Facing a massive hike in health insurance premiums? Here’s what you can do

Higher penalties for not complying with ombudsman orders

As per existing rules, insurance companies are required to implement the orders of the insurance ombudsman’s within 30 days. If they do not, policyholders need to alert the ombudsman again. In such cases, insurers have to shell out penal interest (two percentage points over the prevailing bank rate), as per the Protection of Policyholders Regulations.

In addition to this, the IRDAI has now decreed that insurers will have to shell out Rs 5,000 per day to the policyholder in case ombudsman awards are not implemented within 30 days.

This master circular comes after the insurance regulator revamped product and policyholder protection regulations across the life and health insurance segments in March. “It has brought in one place the entitlements in a health insurance policy available to a policyholder/prospects for their easy reference and also emphasises measures towards providing seamless, faster and hassle-free claims experience to a policyholder procuring health insurance policy and ensuring enhanced service standards across the health insurance sector,” the IRDAI said in a press statement.