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.
