IRDA Draft on color coding of health insurance policies
It’s not easy for a retail consumer / policyholder to completely comprehend the jargons used in Health Insurance policies. In order to facilitate retail consumer and to simplify the process of buying of health insurance, the Insurance Regulatory and Development Authority (IRDA) is all set to introduce a color coding system for individual health products. The objective of this ‘color coding’ is to enable the customers to gauge the complexity of the product, they are buying
In a draft released on 5th Oct 2020, the insurance regulator said, every health insurance product offered by general and health insurance companies shall carry a color code. This code will indicate the level and extent of the complexity of the product.
According to the draft, the insurance companies will use “green, orange, and red” colors to indicate the complexity of the products that they offer. Green will signify that the product on offer is simple, and easy to comprehend, while orange will mean that the product is moderately complex. Red will indicate that the product offered is more complex than both green and orange coded products.
Note, these guidelines when released will be applicable to individual health products and not group health insurance products that are taken by institutions / corporate.
Every individual health insurance
product offered by general and health insurance companies shall carry a
diagrammatic representation of the color coding. This representation of the
product shall be decided based on the score arrived for a given product on a
scale of 0 to 6.
The regulator has enlisted 7
parameters based on which the products offered by the general and health
insurance companies will be scored. These parameters are the number of optional
covers offered, percentage of co-pay, number of months of waiting period,
number of treatment procedures/ diseases under sub-limits, deductibles, number
of permanent exclusions, and simplicity of terms and conditions.
All the 7 parameters shall have equal weightage of 14.28 % each, the regulator said. The weighted average score of each of the parameters will be calculated by multiplying each of the parameter score with its weightage of 14.28 per cent. The weighted average scores of all the 7 parameters will then be added together to get the final score of the product on a scale of 0 to 6, it further said.
A product will be assigned
'green' if it attains a score of 2 or less, based on the parameters. Similarly,
an 'orange' product will have a score of more than 2 but less than or equal to
4, while a product with a score greater than 4 and less than or equal to 6 will
be assigned the 'red' color.
IRDA has asked insurance companies to share comments / thoughts 15th October 2020. If this proposal is implemented, then it will be yet another step by insurance regulator to help common consumer make informed decision
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