Importance of lifetime renewability clause

Until recently, most insurance companies had a cap of 65-70 years of age for health insurance. As per the revised guidelines of the IRDAI, all health insurance policies are to feature lifetime renewability.

As a mandate, insurers must increase the entry age up to 65 years for renewing a health insurance policy. It also means that after the insurer issues a health insurance policy, they will have to keep on renewing it until the insurers’ lifetime. The IRDAI has further stated that the insurer will not be able to charge extra premium from such policyholders without any valid reason.

For retired individuals, lifetime renewability takes the pressure off finances in case they are confronted with serious illness. Age also makes one more susceptible to diseases and falls. Considering the healthcare inflation, the importance of lifetime renewability has only increased.

The Insurance Regulatory and Development Authority of India (IRDAI) has introduced the ‘Guaranteed Renewability’ of Health Insurance Policies in India for life with continuity of benefits. This has been done for the benefits of policyholders. This facility doesn’t just benefit policyholders, but policy providers too because it ensures a longer flow of insurance premiums.

There were many things that made IRDAI introduce lifetime renewal of health insurance.

• Earlier, the renewability would depend on the claims made in the previous year
• Insurance companies had to maintain a claim-based loading when policies were renewed
• This led to an increase in subsequent premiums if a claim was made.
• Such a practice would make policies tighter on the pocket.
• Many customers would fail to buy adequate cover.

Besides, age was another important factor. Almost, every insurer used to maintain an age cap for renewing health policies. Given that policyholders had to face difficulty in renewing their policy if they crossed the age of 60-65.

• Guaranteed policy renewability for life
• If there is no policy alternation, you can avoid fresh medical declaration at each renewal
• The insurer will assure you that the policy will not stop in old age
• Make timely premium payment to get break free cover

The policy renewal is possible regardless of what claims have been made in the previous policy year or irrespective of how old the policyholder is.

With such changes in effect, the health insurance premiums have witnessed an upward move. The premium of the same plans at the age of 60 or beyond may increase by 20% to 25%.

It’s common that most insurance claims are raised by policyholders when they cross the age of 60 years. This is because when they become older, the risk of contracting illnesses is much higher. Therefore,

• Insurance companies face a higher risk of settling claims.
• They can’t charge premiums beyond a limit set for the senior age group.

So, they are under pressure to price their insurance products.

Apart from all these, the abolition of claim-based loading on subsequent premiums also has crucial roles to play in increasing the premium rates. Earlier, the claim based loading would allow insurers to raise premiums in the subsequent year in case of a claim in the previous year. The new rule now does not allow this.

On the first hand, many policyholders, especially senior citizens, appreciate this. On the other hand, many others are not satisfied due to the result of increased premiums. When it comes to health protection at any age, insurance companies can only refuse a policy if the policy buyer has an adverse health condition.