The insurance regulator has proposed a ban on credit-linked group health policies such as critical illness covers that are bundled with home loans. The IRDAI’s intention is to have all such policies withdrawn by the end of this month.
The products that are pushed to home buyers are mis-sold as health covers, reported Times of India quoting industry sources.
“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,” the IRDAI said in a draft circular. The regulator has, however, made an exception for sales of personal accident policies.
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, the IRDAI said that insurers that wish to offer group insurance should have a board-approved group underwriting policy.