Coming, a savings account with your health insurance policy
The insurance regulator is considering allowing a savings-cum-health insurance product.
A panel headed by M Ramaprasad, Member (Non-Life), Insurance Regulatory and Development Authority of India, in a recent report to IRDAI, said: “Such a product could be a health insurance plan that provides an account to the policy-holder where she can put money to save for future medical expenses… ”
Ramaprasad said all classes of insurers may be permitted to offer the product. The move is to drive growth in health insurance, which still remains last on people’s priority list, especially in rural and semi-urban areas. The new proposal differs from a regular health insurance plan, which has no savings component attached to it but only a premium segment.
The proposed health savings account will offer interest, as even now insurers factor in this component when calculating the final returns, but cannot be operated like a bank account. For the latter reason, it will not need the RBI’s nod.
How it will work?
In the health savings account, the premium is to be divided into three components. While the first will be earmarked for the risk charges for health insurance, the second will be for expenses, and the third will be the savings component. The panel has also suggested a mathematical formula for these components.
The health insurance component shall have a guaranteed renewability for life but the risk charges could vary with the insurer having the right to review the risk premium rates annually.
The new product will also get the relevant tax breaks; premium paid for health insurance is now eligible for exemption under Section 80 D of the I-T Act, up to ₹20,000 every year.
While the plan may be new to India, it has been in vogue in countries such as the US for at least a decade. But, according to industry observers, since health-care is subsidised in many countries, there is little incentive to save for this purpose. Hence, it is not practised as suggested by the IRDA panel.
According to the panel report, with a premium collection of ₹20,450 crore last year, the health insurance business is undergoing rapid changes, especially in the wake of the recent amendments to the Insurance Act, which now recognises this segment as a separate business vertical. The regulator, too, needs to form a separate department or vertical for health insurance by bringing all players involved in the sector together. “Only then, (can) a level playing field and a consistent approach of regulatory aspects for development of health insurance be facilitated,’’ the report said.
A senior IRDA official said the regulator is expected to take a positive decision shortly.