Impact of Guaranteed Renewability on Policies, Premiums, Insured & Insurers
Published On Jan 27, 2020 5:30 AM By Prashant Srivastava
Are you aware of the guaranteed renewability feature in health insurance?
If not, this blog post is worth reading.
These days, Health Insurance policies come with guaranteed renewability feature.
This is a kind of rule, which allows policyholders to renew their policy throughout their entire life.
It’s a sign of great relief, especially for those with no post retiree mediclaim plan.
Let’s throw light on this rule.
The Insurance Regulatory and Development Authority of India (IRDAI) has introduced the ‘Guaranteed Renewability’ of Health Insurance Policies in India for life with continuity of benefits. This has been done for the benefits of policyholders.
However, this facility doesn’t just benefit policyholders, but policy providers too because it ensures a longer flow of insurance premiums.
Delve a bit deeper to understand what the Guaranteed Renewability rule entitles the policy buyer, its impact on insurers, and the pricing factor.
Health Insurance Before Guaranteed Renewability Rule
Until the influx of the changes, health insurance policies in India were stringent about policy renewal.
- Policyholders encountered problems when it came to policy renewal.
- They would be left in the lurch.
- They were not able to get a health cover.
What caused to introduce lifetime health insurance renewal facility?
There were many things that made IRDAI introduce lifetime renewal of health insurance.
- Earlier, the renewability would depend on the claims made in the previous year
- Insurance companies had to maintain a claim-based loading when policies were renewed
- This led to an increase in subsequent premiums if a claim was made.
- Such a practice would make policies tighter on the pocket.
- Many customers would fail to buy adequate cover.
Besides, age was another important factor. Almost, every insurer used to maintain an age cap for renewing health policies. Given that policyholders had to face difficulty in renewing their policy if they crossed the age of 60-65.
What to Expect Now?
With the Guaranteed Renewability is in full effect, the new health policies allow policyholders to renew their plans lifetime. There are no age restrictions now. Here are what you can expect from your health insurance now:
- Guaranteed policy renewability for life
- If there is no policy alternation, you can avoid fresh medical declaration at each renewal
- The insurer will assure you that the policy will not stop in old age
- Make timely premium payment to get break free cover
The policy renewal is possible regardless of what claims have been made in the previous policy year or irrespective of how old the policyholder is.
Therefore, with this step of IRDAI, you are eligible for buying a health insurance plan even at the age of 65 and get the policy renewed through the course of your entire life.
Benefits for Policyholders
Removal of age restriction: The most crucial benefits of the arrival of this clause is:
- It has removed the age restriction when it comes to renewing the policy.
- This has further led to eradicating the barricade that used to come when a senior citizen was to buy health insurance.
- A sure boon for elderly one, senior citizens are not denied of health cover.
- They can now have insurance and meet medical emergencies throughout their life.
Below are the age criteria for health policies maintained by insurance companies.
- Minimum entry age between 3-5 years
- Maximum entry age 65 years
- Maximum age to renew the policy is s lifetime
These criteria can vary from insurer to insurer.
Impact on Insurance Premiums
With such changes in effect, the health insurance premiums have witnessed an upward move. The premium of the same plans at the age of 60 or beyond may increase by 20% to 25%
Let’s get in details from the insurer point of view.
It’s common that most insurance claims are raised by policyholders when they cross the age of 60 years. This is because when they become older, the risk of contracting illnesses is much higher. Therefore,
- Insurance companies face a higher risk of settling claims.
- They can’t charge premiums beyond a limit set for the senior age group.
So, they are under pressure to price their insurance products.
Apart from all these, the abolition of claim-based loading on subsequent premiums also has crucial roles to play in increasing the premium rates. Earlier, the claim based loading would allow insurers to raise premiums in the subsequent year in case of a claim in the previous year. The new rule now does not allow this.
We eagerly tend to relax and unwind. And health insurance helps us achieve this goal. But, the move of IRDAI to allow lifeline renewability of the policy has brought out mixed feeling in the insurance industry.
On the first hand, many policyholders, especially senior citizens, appreciate this. On the other hand, many others are not satisfied due to the result of increased premiums. When it comes to health protection at any age, insurance companies can only refuse a policy if the policy buyer has an adverse health condition.
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