Mumbai: Six years after it banned life insurance companies from offering health insurance products, the Insurance Regulatory and Development Authority of India (Irdai) is mulling allowing it again as the new chairman is relooking at long-pending changes to enhance penetration of insurance in the country.
Allowing life insurance companies to offer health plans is one of the big decisions in front of Irdai chairman Debasish Panda, who has vowed to simplify regulations and capital requirements and introduce new products to widen insurance penetration in the country.
“Allowing life insurance companies to manufacture and distribute health plans has been a bone of contention in the industry because general and standalone health insurance companies are clearly opposed to it. But a decision will have to be made especially as a committee to evaluate this feasibility more than two years ago has submitted its report,” said the CEO of a life insurance company.
The nine-member committee co-chaired by LIC chairman MR Kumar and former
chairman G Srinivasan was formed in February 2020 to examine the feasibility and business scope for life insurance companies to offer indemnity-based health plans.
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“The committee had sent its recommendation more than one-and-a-half years ago. But since the life insurance members were outnumbered in the committee, all it could suggest was allowing life insurance companies to be distributors of health plans, though the demand has always been to enable life insurers to offer health because it is a natural combination rather than clubbing it with general insurance products like motor,” said a member of the committee.
Industry captains say a new chief at the Irdai along with the recent public listing of
could alter the status quo in the industry.
“The new Irdai chairman wants things to move. But more importantly, since now LIC is listed, it is in the government’s interest to make sure it is profitable, and this is one way of doing it. Allowing LIC to offer health will open up a whole new segment, so the key is with the government. It is also important to see what are LIC’s views on this since previously they have been reluctant to venture into new areas as they were always under pressure to fulfil the government mandate,” said the CEO cited above.
Allowing life insurers to offer health plans will dent the fortunes of standalone health insurers and general insurance companies. The regulator will also have to take into account their complaints, especially at a time when there has been increased awareness of these products post-Covid.
A research paper by the National Insurance Academy released earlier this month said that health insurance premium collected has jumped to ₹73,330 crore in FY22 from ₹58,572 crore a year ago and is growing at a compounded annual growth rate of 24%.
“This has been a proposal which has been in the works but a decision has not been made yet. There are other issues which are also under consideration, so it is not as if this decision is next in line,” said a senior Irdai official. The regulator could not be immediately reached for comment.
Among the proposed reforms in life insurance are the standardisation of products and simplifying regulations, more specifically on calculations of management expenses for these companies.
“But this move is probably more important because it has ramifications throughout the insurance industry,” said the CEO cited above.
It is unclear whether Irdai would want to take a fresh look at health insurance or will rely on already existing submissions by previous committees in this regard.