In 2020, the Insurance and Regulatory Development Authority of India (IRDAI) announced that health insurance plans will soon be presented in a new format. As per the guidelines drafted for this change, health insurance products shall now be classified according to their complexity through a system of colour-coding. The colours would be green, orange and red, with each shade implying a different level of complexity.
Health insurance products deemed as easy to understand and uncomplicated will be colour-coded green. Those which are moderately complex will be colour-coded orange and those which are highly complex shall be colour-coded red. Once implemented, this system is bound to change the way many people will look at health insurance.
Let’s take a look at the benefits this change is likely to bring.
- Health insurance will be easier to buy
Since the different colours represent different levels of product complexity, the potential policyholder will find it easier to choose what is suitable for them. Currently, there is no such classification system and the policyholder has to look at each product to understand its coverage and other features. This often leads to the individual getting confused about the different jargon, features and coverage options available with health insurance companies.
When each product is marked as a colour, the person looking for health insurance can approach the products as per their needs only. So, a 24-year-old individual looking to buy health insurance for the first time will find the whole ordeal easy as they would know that they want to go for simple health insurance plans that offers basic coverage. Accordingly, they would like to go directly for green-marked health insurance products. As the policyholder ages, they can look towards porting to an orange-coded plan or a red-coded plan as per their needs.
- Health insurance will become more accessible
The low rates of health insurance in the country are a sign that while insurance has become affordable, a large number of people still remain hesitant about purchasing health insurance for themselves. Only 34% of Indians were covered under any sort of health insurance plans in 2019.
Though health insurance has observed a positive growth in 2020, there is still lots more to cover. This lack of participation in health insurance is also partly due to the image of insurance as a complex and complicated process. A system that simplified insurance for the masses was long overdue. The insurance regulator and industry experts are looking at the colour-coding system as a hopeful indication of change and growth in the number of people covered.
3.Efficiency in health insurance distribution
Due to Covid-19, 2020 saw many people wishing they had adequate coverage that could help them out in those difficult times. Considering the situation, IRDAI has introduced this change at the correct time. With more and more people aware of the need for medical coverage, the demand for reliable and accessible health insurance has seen an exponential rise.
The colour-coding system can help the insurance regulator and health insurance companies to meet the rising demands in an organized and efficient manner. IRDA has laid down seven parameters that will decide the complexity of each product – the number of optional covers offered, co-pay percentage, number of months of the waiting period, number of treatment procedures/diseases under sub-limits, deductibles, number of permanent exclusions, and simplicity of terms and conditions. Based on these parameters, each product will be given a score between 0 and 6, with each parameter having equal weightage in the calculation.
Products that score between 0 to 2 will be green-coded health insurance products; those with a score between 2 to 4 will be considered as moderately complex or orange-coded. And those in the range of 4 -6 would be marked red. This efficient and calculated system would ensure that all health insurance products are presented and distributed in an efficient and orderly manner.
We hope that this article has helped you understand the benefits of colour-coding health insurance plans.