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Easier norms to enlarge health cover

New Delhi, Sept. 26: The Insurance Regulatory Development Authority (IRDA) today announced a key relaxation that allows life insurance companies to offer higher health cover, along with their main policy.

Chairman N. Rangachary said life insurers would be free to offer riders (both medical and non-medical taken together), whose sum assured can be equal to the one assured by the main life insurance policy. The relaxation would be for long-term health insurance riders lasting for three to five years, he said. The regulator will issue final guidelines on the riders in 15 days.

“Due to pressure from companies, we have decided to relax premium on health and non-health riders, provided they are long-term in nature, ranging from three to five years. Hope this will satisfy the insurers,” he added.

Present IRDA norms allow life insurers to collect a maximum premium of 30 per cent from riders, in addition to the premium on the base policy. This, according to insurers, is unfair since it limits their innovation and creativity in coming up with new riders.

Speaking at the seventh international conference on insurance organised by Ficci, D.C Gupta, secretary (banking and insurance) in the finance ministry said: “Considering bancassurance has a lot of potential, the government is seriously thinking of working out a mechanism that will benefit both sectors after convergence. We hope to set up a study group which will analyse and work for the improvement of banking and insurance. It will have members from both industries.”

Gupta said since a large number of agencies are allowed as distribution channels, co-operatives and panchayats, which can expand network, should be added to this list. “After the 53rd Constitutional amendment, Panchayats have improved tremendously.”

Speaking on the issue of addition of third party administrators (TPAs) in insurance industry, Gupta said there was a need to have either an industry forum or one sponsored by the IRDA to observe the best practices adopted by TPAs world wide.

Rangachary divided the entire insurance spectrum into three categories — aggregation, segregation and moral hazard. Insurance aggregation includes deepening of market, increase of penetration, product introduction as well as selling through distribution channels.

On the other hand, segregation included concepts of risk management, analysis and pricing mechanism. Rangachary said a market should have differential pricing. “We must learn to recognise good risk and punish the bad one.”

Speaking on the issue of moral hazard, he said: “We need to build concepts that work all over the world. Expectations of returns by policyholders, especially in the general insurance industry, is wrong.”

Rangachary added that to resolve the question of moral hazard we need to change the mindset of the customers. Also, time and money needs to be spent on educating the customers.

He said the general insurance business suffers due to tariff built on unreliable statistics. “The tariff advisory committee has not received full co-operation from the insurers on giving right statistics.”

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