The IRDAI has introduced new regulations impacting life and health related insurance claims, in a major move to protect consumer interests.
Deadlines and financial penalties
In its “IRDAI Protection Of Policyholders' Interests Regulations 2017” issued on 6 July, the regulator set deadlines and fixed penalties for delays in settling health claims. Insurers must pay claims within 30 days. If a claim warrants an investigation, the insurer will need to complete it within 30 days and settle the claim within 45 days from the date of receipt of the last necessary document.
In life insurance, after a claim is made, the insurer needs to ask for all the documentation within 15 days and make the payment within 30 days. If a life claim has to be investigated, then the insurer gets up to 90 days for investigation. If the insurer decides to pay, it has to do so within 30 days from when the decision to pay was made.
In the case of any delay, the insurers will have to pay interest at the "bank rate plus 2%" on the claim amount from the date of receipt of the last necessary document to the date of payment.
Explicit exclusions and conditions
IRDAI has also said that terms and conditions for claims and coverage terms must be stated explicitly and policy exclusions should be grouped upfront. For instance, in life insurance, an insurer needs to state things like the type of policy, features, premium payment, riders, exclusions, policy conditions for surrender or discontinuance, revival of the policy and the grievance redressal mechanism. IRDAI has given insurers till 31 December to make such changes in their policy documents.
Some other points of note are as follows:
Insurers need to state service parameters and turnaround time—the average servicing time taken for claims as approved by their board—on their website, noted the Times of India.
- Employer-paid health insurance
With the prevalence of employer-paid health insurance in India, policy documents need to mention upfront co-payer limits if the policy is co-paid by employees.
- Withdrawn or modified products
Insurers are also now required to update on their website the terms and conditions of every insurance product that is withdrawn or modified, with the list updated regularly.
Insurers should have a proper policy in place to resolve the grievances of policy holders effectively and speedily.
The premium pertaining to health related or critical illness riders shall not exceed 100% of premium under the basic product, while the premium under all other life insurance riders put together shall not exceed 30% of premium under the basic product. Any benefit arising under each of these mentioned riders shall not exceed the sum assured under the basic product.
Ambiguity is also being cleared. Mr Nilesh Sathe, Member, Life, IRDAI, said: “Earlier there was some ambiguity in the way penal interest for the delayed settlement of a claim was calculated.... But now we have brought about clarity in the rate at which it has to be calculated and the duration for which it has to be paid.
“Now, if an insurer is supposed to settle the claim in 30 days, but takes 31 days, then it needs to pay interest for 31 days and not just one day,” he added. This would lead to faster settlement of claims.