While miss-selling of insurance policies by insurance agents has become a norm in India, we also come across several cases of rejection of genuine claims by insurance companies. Sadly, such claims are usually turned down by insurance companies on the ground that the certain claim made by the insured was in the policy’s ‘exclusion’ list. However, such lists are hardly shown to the customers while selling insurance policies. Moreover, while the benefits of a policy are displayed prominently, ‘exclusions’ usually remain hidden somewhere inside the policy documents.
To curb such malpractices as well as to protect the interest of policyholders, the Insurance Regulatory and Development Authority of India (IRDAI) has recently come out with IRDAI (Protection of Policyholders’ Interests) Regulations, 2017, which are believed to be a major reform over the IRDAI (Protection of Policyholders Interests) Regulations, 2002.
For instance, the regulation has put emphasis on increasing the accountability of insurers by insisting them to display Board-approved service parameters and turnaround times on its website and keep the same updated as and when the service parameters are revised by the Board.
“To counter the instances of mis-selling, miscommunication and hidden charges, the regulator has asked to provide transparency through grouping of exclusions into standard, policy-specific and waived under additional premium. Also, given the growth of health insurance and to bring more transparency into the whole process of policy servicing and claims management, the regulator has asked insurers to list all sub-limits, proportionate deductions, co-pay limits, pre-existing disease (PED) waiting period and deductibles upfront in the health policy documents,” says Rajiv Kumar, MD & CEO, Universal Sompo General Insurance.
Talking about the regulation, Sunil Sharma, appointed actuary & chief risk officer, Kotak Life Insurance, says, “IRDAI (Protection of Policyholders’ Interests), Regulations 2017 has been promulgated to ensure that the interests of the policyholders are protected. It defines the obligations of the insurance companies, distribution channels and other regulated legal entities involved in insurance towards the policyholders. It requires insurers and distributors to have in place standard operating procedures and best practices in the sales and services of insurance.”
According to Sharma, following are the key highlights of the regulation for consumers:
1. Each of the insurance company is required to have Board- approved policy for the protection of policyholders’ interest which will cover various things:
# Steps taken by insurance company to enhance insurance awareness, about company’s products
# Company need to define service standards and turnaround times
# Procedure for faster resolution of complaints from customers
# Steps to prevent miss-selling of the practices and ensuring that the prospects are fully informed about the benefits and terms and conditions under the product.
2 Insurance company will need to display services and corresponding turnaround time on the website.
3. There are certain mandatory information which needs to be provided in the prospectus of an insurance product, like benefits, cover, exclusions, what is covered, any discount on the premiums, availability of riders.
4. The regulation limits the premium and sum assured on riders; premium on health/CI riders shall not be more than 100% of the base policy premium and further premium under all other riders put together shall not exceed 30% of the premium under the base plan.
5. Each insurance company is required to have a list of all products, including the T&C, that are available for offer and products that have been withdrawn.
6. The key point coming from the regulations is that the Proposal Form shall prominently state the requirement of Section 45 of the Act which requires that the policy shall not be called in question on the grounds of misstatement.
7. There are certain minimum standards which need to be covered in the policy contracts which help standardise the contracts across the industry.
8. Insurance company has 15 days to process the freelook cancellation to the policyholders.
9. Another important aspect covered in the regulations is that it provides a detailed guidelines and turnaround time for the settlement of the claims by the insurance company. All requirements shall be sent to claimant in one go, rather than in a piecemeal manner, within 15 days of the claim receipt. Further, turnaround has been clearly defined for claim investigations and decision. Insurance company will need to pay interest for late payment of claims beyond the turnaround time defined as per regulation.
10. There is detail requirement on the Grievance Redressal Process coverage.
Thus, “the regulation will surely enhance the trust and faith among the policyholders as it has provided an extensive Grievance Redressal Mechanism to address the grievances of policyholders as every insurer needs to have a Grievance Redressal Officer (GRO) of a senior level at the corporate office, supported by a designated Grievance Officer at every other office,” says Kumar.