Irdai to start colour coding of individual health plans based on complexity

Health insurance products are chosen by institutions who are normally considered as better informed entities
In order to further simplify the buying of health insurance by retail consumers and to help them make informed decisions, the Insurance Regulatory and Development Authority (Irdai) is set to introduce a colour coding system for all individual health products that will enable the customers to gauge the complexity of the product.

In a draft released on Monday, the insurance regulator said, every health insurance product offered by general and health insurance companies shall carry a colour code, which will indicate the level and extent of the complexity of the product.

The insurance companies will use “green, orange, and red” colours to indicate the complexity of the products that are on offer. Green will signify that the product on offer is simple, and easy to understand, while orange will mean that the product is moderately complex. Red will indicate that the product offered is complex when compared to both green and orange colour coded products.

The regulator has sought comments from all stakeholders on the matter by October 15.

“The colour code shall be indicated in the health insurance products disclosed on the websites of insurers so that the customers can make an informed choice while buying a health insurance product”, Irdai said. Every insurance advertisement which promotes a health insurance product shall also mention the color code of that particular product, the regulator added.

These guidelines are only applicable to individual health products as the regulator is of the opinion that group health insurance products are chosen by institutions who are normally considered as better informed entities.

Irdai has stipulated a number of parameters, based on which the products on offer will be given a score between 0 and 6. 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' colour.

The regulator has listed 7 parameters based on which the various products offered by the general and health insurance companies will be scored such as 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 be given equal weightage of 14.28 per cent, 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.

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