The IRDAI has effected a new regulation which is seen as a big move towards protecting policyholders' interests, including stipulating that insurers are to settle claims in a timely manner and defining the penalties that could be imposed on insurers for delays.
The “IRDAI Protection Of Policyholders' Interests Regulations 2017” sets down a 30-day period for the settlement of nonlife claims—after insurers get all the documents, including the surveyor’s report. In health insurance, if a claim needs to be investigated, 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.
The regulation outlines features and terms and conditions that need to be stated explicitly in a policy. 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.
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.
The notification also clarifies that if a claim is ready for payment but the payment cannot be made due to reasons of proper identification of the payee, the insurer will still pay a penalty, reported Livemint.
Under the new regulation, insurers have to post on their website the average processing time to be taken for claims, as approved by their board of directors.
IRDAI also insists that the policy document for employer-paid health insurance mention upfront co-payer limits if the policy is co-paid by the employees. Insurers are also now required to update on their website the terms and conditions of every insurance product that is withdrawn or modified.
For nonlife policies where a surveyor is appointed, the surveyor’s report needs to be given to the policyholder if he or she asks for it.
“The notification also mandates insurers to categorise exclusions that are standard, specific to policy, those that can’t be waived and those that can be waived on payment of extra premium. This is important because in motor insurance there are many exclusions such as depreciation or engine loss that can be covered by paying extra,” said Mr Puneet Sahani, Head, Product Development, SBI General Insurance. “This will also make people aware of add-on covers that take on such exclusions. In motor, there are about 20 add-ons that people don’t know much about,” he added.