Irdai to ban credit-linked group health insurance
MUMBAI: Insurance regulator Irdai has proposed a ban on credit-linked group health policies such as critical illness covers that are bundled with home loans. According to industry sources, the products that are pushed to homebuyers are mis-sold as health covers. Irdai has proposed that all existing credit-linked group health policies be withdrawn by December 31, 2020.
“As the primary purpose of any health cover is to meet the treatment costs or to manage the lifestyle on diagnosis of critical illness, no insurer is permitted to offer any indemnity or benefit-based credit-linked group health products,” Irdai said in a draft circular. The regulator has, however, made an exception for the sale of personal accident policy.
Many home loan providers bundle a critical illness cover with the home loan. But advisers say that, ideally, critical illness covers should be purchased along with health insurance and not as a standalone cover. Also, premiums on group covers are completely unregulated unlike individual policies, where the regulator ensures the pricing is fair.
In the draft circular, Irdai said that henceforth insurers that wish to offer group insurance should have a board-approved group underwriting policy. Misselling by banks in India has largely gone unpunished as it falls in a regulatory grey area.