No-frills Insurance to Aid Government's Inclusion Drive

The finance ministry has asked state-run general insurers to expedite launch of no-frills health insurance products targeting India's poor, part of its agenda of taking financial inclusion to the masses. The ministry is of the view that no-frills products will help in delivering affordable healthcare to a wider set of population.

There are 4 public and 20 private sector general insurers registered with the Insurance Regulatory and Development Authority, but none of them offers a basic health insurance covering just the most prevalent diseases.

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"We have had a good start with no-frills bank accounts and the cost of the New Pension Scheme is also being brought down. This no-frills health insurance scheme will add to the bouquet of products, completing the inclusion agenda," a finance ministry official said.

According to some estimates, there are between 60 and 70 crore people in India who do not have any medical cover. Insurance companies have realized the business potential in this segment – Rs. 70,000 crore by way of premiums. At least 2 insurers are in various stages of launching a basic policy to cover this group.

"We have been working on this and soon we hope to get the required clearance from the insurance regulator," said R. K. Kaul, chairman of Oriental Insurance Company. The public sector general insurer plans to put caps on charges covering particular diseases or medical procedures.

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"In our policy, about 40 diseases will be covered, but there will be a limitation on the overall charges per disease," Kaul said, adding that most policy holders go to the best hospitals without realizing that they exhaust their sum assured faster if they approach a premier hospital.

"A hernia operation can be done in a middle-level hospital for about Rs. 20,000 or for Rs. 50,000 in a super specialty hospital," Kaul said. "In a no-frills policy, this will be capped at say Rs. 20,000."

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New India Assurance is another public sector general insurance company working on a similar product. "We are looking at 15-20% less premium amount and there will be lot of middle and low-income group people looking to get a similar product," an executive at New India Assurance said, adding that product will cover cataract, dialysis and swine flu among other diseases and procedures.

Oriental Insurance's Kaul says the no-frills health insurance will be a game changer. "There will be no limits for emergency cases and the policy holder will also get the desired cover," he said.

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Source-Medindia