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Health Insurance Industry - Basic Structure & Workings

If you have decided to get a health insurance policy for yourself and your family, it is always best to know how your hard earned money will be handled. Being informed on the workings of the insurance machinery will go a long way in making you aware of your rights as a customer. It will also keep you abreast of the recourses available to you in the event of monetary disputes. This article will give you some general information about the industry, its watchdogs, structure and terminology.

Simply put, it works like this
  • You decide to get a health insurance policy.
  • You choose the company that gives you the best option.
  • That insurance company outsources your account to a Third Party Administrator or TPA so that your business can be handled efficiently.
  • The TPA becomes your point of contact for all insurance related interactions.
  • If you need your insurance claim, the TPA gets it organized.
  • If for some reason, your claim gets rejected by the TPA and the insurance company, you can take the matter further to what is called an Ombudsman.
  • There are twelve Ombudsmen in the country appointed by an insurance council body with their jurisdictions alloted to them geographically.
  • All these insurance companies, mediators and agents are overseen by the IRDA.
Which brings us to the IRDA. It seems appropriate to give some information here about the government body presiding over the insurance industry if only to serve as a reassurance that insurance companies can be held accountable for their actions by a higher power.

What is the IRDA?
The government has created a system of checks & balances to protect your interests and to regulate and promote an orderly growth of the insurance industry. The Insurance Regulatory & Development Authority or IRDA is one such body. It is basically a ten members' team comprising of a Chairman, five full time members and four part-time members, all appointed by the Government of India. This organization came into being in 1999 after the bill of IRDA was passed in the Indian parliament.

Its creation has brought revolutionary changes in the Indian insurance sector. In the last 10 years of its establishment, the industry has seen tremendous growth. When IRDA came into being, the only players in the insurance industry were Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). However, since then 23 new players have emerged. This growth has led to healthy competition which means better options and facilities for you, the customer.

How does the IRDA work?
Insurance providing companies have to be recognized by the IRDA before they can market their wares. This is done by issuing them a certificate of registration. Further on, renewals, modifications, withdrawal or even cancellation of such registrations is in the hands of the IRDA. This ensures that the insurance providers operate at a certain level of efficiency within a framework of rules.

Watching out for your interests
The IRDA protects your interests as policy holders irrespective of what insurance company you sign up with. It does so especially in matters related to the assignment of policy, nomination by policy holders, insurable interest and resolution of insurance claim, submission value of policy and other such terms and proposals in the contract. It makes sure that you receive, clear, precise and correct information about products and services.

The IRDA regulates the roles of all parties involved in the insurance policy transaction. This includes specifying obligatory credentials and requisite qualifications for the insurance company and its mediators. It also defines the code of conduct for all surveyors and loss assessors involved with the business. It oversees speedy settlements of genuine claims, prevents insurance frauds and other malpractices. It is also responsible for putting in place an effective redressal system in the event of a dispute.

The government appoints Ombudsmen in the country for an effective redressals of your claim. The IRDA plays a supervisory role in the appointment and subsequent workings of the Ombudsmen. Approaching the Ombudsman's office for a quick disposal of your grievance is convenient and will cost no money in fees to you. If you are in disagreement with the Ombudsman's ruling, you can lodge a case with the consumer forum at a district level.

In effect the IRDA works as a guide and watchdog over the insurance industry so that you can get the best possible service in your times of need. In case you wish to know more about the IRDA and its functions, you can visit their website: www.irdaindia.org

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