Typically, life insurers offer double the sum assured to beneficiaries if they are affected by an accident. However, the accident benefit has several exclusions such as for incidents caused by terrorism, riots and war.
Tata-AIG has withdrawn four such exclusions from the accident rider of its policies, an unprecedented move. The withdrawal has been made with retrospective effect from August 23, 2006.
A policyholder can opt for accident rider in his life insurance policy at extra premium. This entitles the nominee to the sum assured even if the insured dies due to accident. But if the death takes place under circumstances mentioned as exclusions, the nominee could not claim the sum. Tata AIG had 20 such exclusions, four of which have now been removed.
The exclusions that have been taken out are riot and civil commotion, industrial action or terrorist activity; war, declared or undeclared, or revolution; deliberate act of the policyholder, nominee or insured; violation or attempted violation of the law or resistance to arrest.
The four specific exclusions have been removed from the accident section provisions attached to the accident riders in basic policies and affect all such policies, Tata AIG vice-president & head for policy owner services and claims C Kumaresh told FE in an emailed reply.
According to IRDA member R Kannan, altering an insurance policy without the regulator's approval is against the norms. One cannot change an insurance policy without prior IRDA approval and as of now we have not received an application from Tata AIG Life Insurance.
But a company source said that the exclusions are being axed as there was a discrepancy in the accident rider vis--vis the application given to Insurance Regulatory and Development Authority (IRDA). The rider has now been re-aligned with the filing to IRDA on suo motu decision of the company, he said.
Tata AIG's move has also surprised the industry players. I have not heard of any company taking such a step. No company can change the existing policy, as it is a legal contract that could not be altered. In case of new policy, this could be done with IRDA approval, an official in Bajaj Allianz Life Insurance said.
These are standard exclusions and this is the first time that exclusions to the policy have been withdrawn, a senior official in Max New York Life said.