Retail Health Cover: The POSP's Product Map

Ask an advisor whether they can sell health cover and the honest answer starts somewhere other than the product. It starts with the rule that defines the channel: a point of sales person may solicit only those products IRDAI has approved as POS products, meaning simple, standardised, pre-underwritten contracts that need minimal underwriting intervention. That restriction is not a footnote to the channel. It is the channel.

On the life side the position is documented. The Master Circular on Point of Sales Products and Persons, Life Insurance (IRDAI/LIFE/CIR/MISC/215/12/2019) sets out five POS-Life products, and non-linked, non-participating health insurance products are one of them. Two constraints attach across POS-Life products generally: the premium paying term must always equal the policy term, and issuance turnaround must not exceed four working days.

On the non-life and health side, the original list under the Guidelines on Point of Sales Person, Non-Life & Health Insurers (IRDA/Int/GDL/ORD/183/10/2015) was motor, travel, personal accident and home. Retail health was not on it. The list has been expanded since, beyond that original set, to take in certain health and rural covers. What exactly is on it today is not something to take from a forwarded brochure or a recruitment page. The operative list is IRDAI's own, published at the IRDAI point of sales page.

The second check is your principal. A POSP is tied to one insurer or intermediary at any time, so what you can place is the intersection of two sets: what IRDAI has approved as a POS product, and what your principal is authorised to place and has put on your slate.

The test that decides scope is pre-underwritten, not the word health on the brochure. If a product needs underwriting judgement, if acceptance turns on medical test results, if terms are negotiated, if loadings or exclusions are applied case by case, then it is not a pre-underwritten contract and it is not a POS product, whatever it is called. Group health placed for an employer is an employer's contract with its own negotiation, claims-experience rating and renewal cycle; it is not a point of sales transaction. High sum-insured indemnity plans routed through medical underwriting sit outside, as does the rest of the commercial shelf.

So why hold a map of a category you can only partly place? Because the boundary is only defensible if you know where it is. "I cannot place that" is a professional answer. "I will try" is how a POSP ends up soliciting outside scope, and the consequence runs to the principal, which means it comes back as a terminated engagement.

The first fork in the map is the one clients most often walk past without noticing.

An indemnity product reimburses what was actually spent, up to the sum insured. Hospitalisation cover, the thing most people mean by mediclaim, is an indemnity contract: the insurer settles the admissible bill, directly with the hospital or by reimbursement, subject to reasonable and customary charges, sub-limits and exclusions.

A fixed benefit product pays a stated amount on a defined trigger, without reference to what anything cost. Critical illness pays a lump sum on diagnosis of a listed condition. Personal accident pays on death or a defined degree of disablement.

They are not substitutes, and the mis-sale runs both ways. A client who bought a critical illness plan believing it was health cover holds a lump sum payable on diagnosis of a specific list of conditions, and nothing at all against a hospital bill from a condition not on that list. A client with a good indemnity policy who spends six months out of work after a cardiac event finds the hospital paid and the income gone.

Fixed benefit answers the consequences of an illness; indemnity answers the bill. Indemnity is where every trap door in this category lives.

An individual policy gives each life its own sum insured. A family floater gives one sum insured shared across the members named on it, refreshed at each renewal. Floaters dominate retail health because they price well, and they price well for a reason that is also their flaw.

The client hears the headline number and mentally distributes it. A ten lakh floater covering four people is not ten lakh each. It is ten lakh for the family, and one bad admission in April can leave three people uninsured until the renewal in March.

Three mechanics decide whether a floater behaves well.

1. Rating follows the eldest member. Adding an ageing parent to a young family's floater re-rates the entire policy on that life, and parks the highest-frequency claimant against the pot everyone else is sharing. Two separate policies frequently serve that household better, and cost less than advisors expect.
2. Restoration mechanics decide the real sum insured. Many wordings restore the sum insured once exhausted, and the detail is everything: whether it restores for the same illness or only unrelated ones, once a year or repeatedly, for the same insured or only the other members.
3. Continuity when the floater breaks up. Children age out, families separate, a member needs their own policy. What carries across in earned waiting periods is a wording question nobody asks at inception, because the family is intact on the day it is sold.

A sum insured is a ceiling, not a promise. Between the ceiling and what actually gets paid sit the sub-limits: room rent, capped as a rupee amount per day or a percentage of sum insured, commonly around one percent for a normal room and two percent for ICU; disease-specific caps on cataract, hernia, knee replacement and similar procedures, often per eye, per joint or per procedure; plus modern treatment sub-limits, ambulance caps and the non-payable schedule.

The room rent one earns its own explanation, because it does not stay in its lane. Most wordings tie room eligibility to a proportionate deduction clause. If the client occupies a room costing more than their eligible category, the insurer does not merely disallow the extra room charge. It scales down the associated medical expenses in the same proportion, because the hospital's own tariff for surgeon fees, nursing, theatre and investigations is banded by room category.

The arithmetic is worth having ready. Take a five lakh sum insured with room eligibility at one percent, so five thousand rupees a day. The client takes a ten thousand rupee room because a relative said the ward was crowded, and the bill comes to three lakh across five days. The insurer applies the ratio of eligible to actual room rent, fifty percent, to the associated medical expenses, not just to the room line. The client's share is not the twenty-five thousand rupee room difference. It is roughly half of everything the room category touched, well over a lakh out of pocket, on a policy with a lakh and a half of sum insured sitting unused.

A health policy issued today is not, today, a health policy for everything. Several waiting periods run from inception, and they run concurrently rather than one after another, which is the first thing clients get wrong.

• An initial waiting period, commonly thirty days from the start of the first policy, during which nothing but accidental hospitalisation is payable.
• A specific-ailment waiting period against a listed schedule (cataract, hernia, piles, sinusitis, joint replacement), commonly two years.
• A pre-existing disease waiting period for any condition diagnosed or treated before inception. The wording states the period, the current product framework sets the outer limit, and the market has moved shorter in recent years. Read the number in the wording you are actually placing.

Beyond these sits the moratorium: after a defined period of continuous cover, the insurer cannot contest a claim on non-disclosure grounds except for established fraud.

Every one of these clocks runs from the inception of continuous cover. Port a policy and the earned waiting periods carry across. Let it lapse and they are destroyed. A client who lets a four-year-old health policy lapse and buys a fresh one has not saved a premium; they have reset every waiting period and the moratorium clock, at an age where the new policy prices worse. On a health book, the renewal date is the client's balance sheet.

The pre-existing disease waiting is also only worth what the disclosure was worth. Helping a client keep a known condition off the proposal to secure a clean acceptance is not a favour: it hands the insurer a non-disclosure defence that survives until the moratorium closes, and it will be raised at the first significant claim, precisely when the client needed the policy to work.

Three more mechanics sit between an approved claim and a settled one.

Co-pay is a fixed percentage of every admissible claim the client bears themselves. It is not a deductible, borne once and then done. It is a share, borne on every claim, for as long as the policy runs. Twenty percent of a four lakh claim is eighty thousand rupees out of pocket after everything else is settled. Check whether it is age-triggered at renewal: a policy with no co-pay at fifty-five that switches one on at sixty-one is a different product to the client at sixty-one, and that is the client least able to replace it.

Network decides how the claim is paid, not whether. Cashless works at hospitals with an arrangement with the insurer or its TPA. Outside it, the client pays first and claims after, which for many households is the difference between using the policy and not being able to. A client in a smaller town buying a plan whose network list has one hospital forty kilometres away has bought a reimbursement policy at a cashless price. The list to check is the one in the client's own pin code.

And cashless is a promise about mechanism, not quantum. Pre-authorisation approves an amount, not the bill. The non-payable schedule, consumables, gloves, syringes and administrative charges, plus any co-pay and any proportionate deduction, is settled at the discharge counter and paid by the client.

Top-up and super top-up sound like the same product with a marketing adjective. They are different instruments, and the difference is one word in the deductible clause.

Both sit above a deductible. In a top-up, the deductible applies per claim. A five lakh top-up over a three lakh deductible pays only where a single hospitalisation crosses three lakh. Two admissions of two and a half lakh each in the same year pay nothing at all, because neither crossed the threshold on its own. In a super top-up, the deductible applies to the aggregate of claims in the policy year. The same two admissions total five lakh, cross the threshold in aggregate, and the balance is payable.

For a client who already holds a base policy, the super top-up is almost always the instrument that behaves the way they assume it does. The top-up layer also carries its own waiting periods and sub-limits, independent of the base policy underneath, so a client with a five-year-old base cover who buys a fresh super top-up has started a new pre-existing disease clock on the upper layer.

The clauses to read before recommending anything

Not the brochure. The wording, and a short list of places it hides its behaviour:

1. Room rent eligibility, and whether a proportionate deduction clause applies.
2. The sub-limit schedule: disease-specific caps, modern treatment, ambulance.
3. Waiting periods, initial, specific-ailment and pre-existing, plus the moratorium.
4. Co-pay: whether any, optional or mandatory, and whether age triggers one at renewal.
5. Restoration on a floater, and whether it applies to the same illness and insured.
6. The non-payable and consumables schedule, and whether an add-on answers it.
7. Network adequacy in the client's pin code, not nationally.
8. Renewal terms, portability, and lifelong renewability.

None of that is a price comparison. It describes what the product does on the day it is used, which is the only day the client will ever judge it on. A health policy is bought once and used ten years later by someone who has long forgotten the conversation. The wording is the only participant still in the room. The work is making sure the client's expectation and the wording were the same document on the day it was signed.