Insurance innovation: Health cover portability

Health insurance market has become competitive following the introduction of portability which allows customers to switch companies without losing their "no-claim" benefits. Although prices have not come down, companies are offering better features. 

The latest is a health policy by Apollo Munich where the sum insured is reinstated in full after a claim. Under the health plan "Optima Restore", if the policyholder uses up the sum insured for any ailment, the sum insured will continue to be available for any new ailment. 

Earlier in October, L&T General Insurance had launched a new plan that reinstated the sum insured if the policyholder had an accident. Apollo Munich has extended the reinstatement for all ailments and is also offering the feature on a family floater plan. Family floater plans are covers where the same sum insured is available for all members. Under "Optima Restore" even if a family member uses up the sum insured the cover is once again reinstated after the claim. Also for those who do not claim, the sum insured will double in two years under a multiplier scheme. Other insurers such as Bajaj Allianz General Insurance are using direct marketing to sell policies through the internet. 

Until now, it was largely property covers like fire insurance that had a reinstatement clause. This allowed for the sum insured to be restored and the cover to continue for the rest of the year for any subsequent claim. According to Antony Jacob, CEO, Apollo Munich Health, despite the additional benefits the price has been kept competitive compared to plans of companies that do not the reinstatement option. He said the company every month sees around 1,000 policyholders from other companies choosing to shift to Apollo Munich. 

Besides the introduction of portability, innovation in health insurance is being driven by monoline companies like Apollo Munich that specialize only in health insurance. Other specialist companies include Star Health andAllied Insurance and Max Bupa Health. More recently, Cigna has entered into a tie-up with TTK Group to provide health insurance in India. 

IRDA issues uniform norms to ensure solvency of insurance companies

Insurance regulator IRDA today introduced uniform asset-liability management norms for market players to ensure their solvency and asked firms to undertake stress tests to ascertain their ability to meet financial obligations in the event of a crisis.
The Asset-Liability Management (ALM) norms, IRDA said, are "critical for the sound management of the finances of the insurers that invest to meet their future cash flow needs and capital requirements."
The guidelines, which would come into effect from April 1, 2012, make it mandatory for insurance companies to prepare an ALM policy and have it approved by the Insurance Regulatory and Development Authority (IRDA) by March-end.
With regard to stress-testing, IRDA has asked the insurance companies to determine their ability to meet financial liabilities after taking into account factors like a 30 per cent fall in equity values and a one percentage point decline in yields on fixed investments, among others.
IRDA has issued these guidelines to bring about uniformity in the ALM norms being followed by both life and non-life insurance companies.
Upon examination of the extant norms being followed by insurance companies, IRDA found they were "incomplete and inconsistent. As the mandate by the authority was very broad, each insurer had adopted their own measures in reporting such details".
The insurers, it said, would have to put in place effective procedures for monitoring and managing their asset-liability positions to ensure that their investment activities and asset positions are appropriate to their liability, risk profiles and solvency positions.
The ALM policy should enable the insurers to understand the risks they are exposed to and develop ALM policies to manage them effectively, IRDA said.
In addition, the ALM can be used to measure the interest rate risk faced by insurers, it added.