A slew of new guidelines from Irda is meant to ensure that senior citizens do not suffer due to high costs charged by insurance companies.

For 20 years, Rajeev Saxena, 55 had a no-claims record with his medical insurance company. That is, he had been lucky that there weren't any significant expenses for his illnesses which had to be claimed from the insurer. Imagine his surprise, when he approached the same company for a renewal of his policy and was quoted a premium that was four times his existing premium.

Obviously, he was livid. But a quick search confirmed that most insurance companies are charging astronomically high for someone of his age, in spite of the fact that he had a clean record. The argument was simple: he was at an age when falling ill was more likely.  

Saxena's experience is not unique. Many elderly find themselves in a similar situation when they go to renew in their medical policy. But they can breathe a sigh of relief now. Last month, the Insurance Development Authority of India (Irda) has advised the insurance companies to restrict the premium hike to 75 per cent, thereby effectively putting a cap on the premiums that can be charged for renewals.

Medical insurance, in India, is undergoing a rapid change. Earlier, an exclusive domain of non-life companies, a large number of life insurance companies are getting into this sector. But the pricing of these products from both life and non-life insurers is such that it is unaffordable, especially for the senior citizens who need it the most.

Traditionally, a medical insurance policy has been a one-year event which has to be renewed each year. Also, the policyholder has been subjected to a different premium when they do so. Though, the opening up of the sector has led to introduction of long-term health insurance policies in the country, most of the people are covered under the traditional policy that needs a renewal each year.

This process makes the situation uncertain because a sharp hike in the premium can hit them hard. Of course, any claim in the previous year increases the likelihood of an upward revision as well.

And for the senior citizens, it is a regular occurrence. There are cases where the hike in premiums, known as "loading" in insurance parlance, jumps significantly to even 100 per cent in a single year. But with this relief they can expect that some stability in the pricing of the products.

In numbers, this means that if a senior citizen paid Rs 12,000 as premium for a specified amount of cover in the previous year, the insurance company cannot charge him/her more than Rs 21,000 next year for renewal.

Another significant change that the Irda has introduced is that the insurance cover cannot be denied, if a person is willing to pay the required premium.

This means that is that no insurance company can deny you a cover if you are willing to pay the premium. In other words, if a senior citizen is willing to shell out Rs 21,000 (as per our example) the insurance company will have to provide the cover to the person.

More importantly, the insurance companies have been told that any disease arising during the life of the policy will not be considered as a pre-existing disease. Again, this will help senior citizens because it is quite common for them to be diagnosed with some new disease at their age.

In short, while opening the market for new players, Irda is beginning to tighten the guidelines to ensure that policyholders do not suffer. And, that is great news in a country where social security is not there at all.

The writer is a certified financial planner