Insurers Are Now Suggesting A CIBIL-Like System In The Industry. What This Can Mean For The Policyholders

Insurers are now suggesting a CIBIL-like system in the industry, according to media reports. First, we need to understand what a credit score is in brief, and how it helps financial companies. The credit score provides individuals with credit history and financial behaviour. The higher the credit score, the better the individual's creditworthiness. In fact, a high credit score could actually mean lower premiums. 

“If a similar approach is adopted in the insurance industry, it will basically mean that fraudulent claims will go down and help not only the insurers but also the genuine policyholders. I don’t think it will create an issue for the policyholders who are giving the correct information about their health to the insurance companies. Indeed, involvement in fraud activity could potentially result in higher premiums and loss of coverage,” says Rakesh Goyal, director, Probus. 

Like the CIBIL system in banking and financial services, the proposed scheme will collect a centralized database of policyholders' claim histories to ensure their fair transaction negotiation, just as a credit system deals with their financial behaviour. 

People With Claim Rejections Can Face A Problem 

“While this might contribute to greater efficiency and transparency in managing and assessing risk by insurers, it can also, however, become a double-edged sword for people already having claim rejections or delays that in many instances are not necessarily under their control,” says Pankaj Nawani, CEO, CarePal Secure. 

For instance, if an individual was subject to a claim rejection over a documentation issue or a hospital that misbilled, it could still put a black mark on their record and make it more challenging to get coverage or make premiums that much more expensive. 

Ensuring Policyholders Aren’t Penalized Unjustly

If we're to have a system of this kind, it has to be fair, not a - blunt tool that treats every case, the same way - the rejections of claims and delays, could indeed arise from all sorts of reasons, each of them; however, not necessarily reflecting the behaviour of a policyholder. “Perhaps a hospital could have messed up the billing, or an insurer might have dragged its feet. But how do we ensure that people are not penalized for what's beyond their control?” asks Navami. He mentions a few things that need to be in place to ensure that it is fair to policyholders. 

Classification Of Issues: Not only should the system simply note that some claim was either rejected or delayed, but it must also give reasons, they really ought to be working on explaining why. The policyholder may possibly have just forgotten a document, or perhaps a wrong code has been submitted from the hospital itself. Certainly, if an insurer has sat on a claim for several months, it shouldn't be considered the fault of the policyholder. Thus, properly-supported records would help filter out the signal from the noise.

A Way To Fight Back: Policyholders must be able to have a clear, systematic process to appeal or rectify errors. So, for instance, if a claim was denied because a clinic billed for a procedure that actually never happened if they can show proof of the mistake -- perhaps a doctor's note or a revised bill -- they should be allowed to erase this denial from their files. Almost like disputing a wrong charge on your credit report.

Fair Weighting: Not every rejection is a red flag. For instance, a claim denied because of lack of coverage, like elective surgery, is not the same as a claim denied for fraud. The system is to weigh these differently, such that a minor hitch does not sink your score as much as serious issues.

Open Book Approach: Policyholders are entitled to know how precisely that score is determined. If insurance companies explain the formula—what elements count, how important they are—policyholders will have the added ability to understand their positions and things they can improve on. It is like providing someone with a rubric for a test instead of leaving them to guess why they failed.

Regulatory Oversight: Regulators should remain vigilant regarding the issue at hand. In this regard, they could put in place regulations—like barring insurer-caused delays from affecting one's scores, or deciding how long a rejection stays in the records. Without oversight, the system could slide into something unfair, and this would strike hardest at the vulnerable groups.

“For policyholders, it is all about being on their toes, knowing their rights, tracking their records, and protesting against anything unfair. After all, insurance is meant to be a safety net, not a trap, and this is by no means beyond possibility with a well-laid-out system,” says Goyal.