Quick Settlement Of Claims To Wider Choices Of Products: Check Irdai Master Circular On Insurance

The Insurance Regulatory and Development Authority of India (Irdai) issued a master circular on June 11 on reforms in general business, repealing thirteen circulars and is aimed at providing customers with a wide array of products, an updated customer information sheet (CIS), quick settlement of claims, and greater transparency when it comes to the insurance buying process. “The provision of easy-to-understand insurance products tailored to meet the individual needs of the customers, providing them with ample choices and enhancing their insurance experience has now been enabled. The shift from a rule-based to a principle-based regulatory framework facilitates ease of doing business and encourages innovation, enabling a reduction in the response time for emerging market needs,” according to the Irdai press statement.

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According to the Irdai circular, this move provides an opportunity to develop simplified and easy-to-understand insurance products tailored to meet the individual needs of the customers, providing them with ample choices and enhancing their insurance experience. The shift from rule-based to principle-based regulations facilitates ease of doing business and encourages innovation, enabling faster adaptation to changing market dynamics and allowing for a reduction in the response time for emerging market needs. This would in turn encourage best practices in product design, and pricing, and enable the provision of a seamless journey for the customer. In this context, the master circular is being issued for general insurance business.

Says Anuj Parekh, co-founder and CEO, Bharatsure, an insurtech startup: “Irdai has introduced a significant update by revising the CIS. This enhancement aims to provide customers with a clear and concise overview of their policy, covering essential details such as scope, coverage, exclusions, and the claim settlement process. As part of this initiative, customers are required to acknowledge this sheet during the policy purchase process. Through this measure, Irdai aims to enhance transparency in the insurance buying process, which has often been hindered by the complexity of insurance terms.”

The master circular shall come into force with immediate effect. It replaces all annexures/circulars relating to the filing of general insurance products. However, any action taken or under process in terms of earlier guidelines and circulars issued on general insurance product matters shall remain valid, according to the circular.

Here are the customer-centric measures for the retail customers:

• Availability of wider choices of products/add-ons covering his / her assets, risks, properties, and liabilities against various perils, exposures, and lines of business. Says Narendra Bharindwal - vice president, Insurance Brokers Association of India (IBAI): “The denotification of tariffs will empower insurers to offer tailored products, providing policyholders with more choices that fit their specific needs. This flexibility fosters innovation, allowing insurers to design bespoke coverages that can address unique risks, thereby enhancing customer satisfaction and market competitiveness.”

• Possibility of customization of products and flexibility to choose products as per their needs.

• Introduction of a Customer Information Sheet (CIS) to provide clear and concise policy details including scope of coverage, exclusions, warranties, and claim settlement processes. “The introduction of the CIS is a pivotal move towards transparency. By providing clear, concise details about policy coverage, exclusions, and claim processes, CIS will enable customers to make informed decisions. This measure will significantly reduce misunderstandings and disputes, enhancing trust in the insurance sector,” says Bharindwal.

The updated CIS offers customers all relevant information pertaining to their health insurance in simple terms. It includes details, such as the type of insurance policy, the sum insured, policy coverage, exclusions, the waiting period, and financial coverage limits, such as sub-limits, co-payments, and deductibles, among other things.

• No claim shall be rejected for want of documents. Required documents are to be called at the time of underwriting the proposal. The customer may be asked to submit only those documents necessary and related to claim settlement (if cashless is not available). “Ensuring that no claim is rejected due to insufficient documentation shifts the burden of proof onto insurers during the underwriting process. This change simplifies the claims process for policyholders, reducing administrative hurdles and expediting claim settlements, which enhances the overall customer experience,” adds Bharindwal.

• Retail customers can cancel the policy anytime by informing the insurer. An insurer can cancel the policy only on grounds of established fraud. The insurer shall refund a proportionate premium for the unexpired policy period on cancellation.

• Strict timelines for settlement of claims including turnaround time (TATs) for appointment of surveyors and submission of their reports. It will be the duty of an insurer to obtain timely survey reports. When an insurer settles a claim, it means he pays money to a policyholder in the event of a loss or risk against which they are insured.

• No contribution clause is to be applied in case of multiple policies.

• Additional options of “pay as you drive”/ “pay as you go” to be given as a first choice to the customer in motor insurance.

• No burden on the customer for disposal of salvage. The policyholder is to be paid the claim amount. Collection of salvage from the customer is the insurer’s responsibility.

• Homeowners' “fire” policy to have the option to choose add-on covers such as flood, cyclone, earthquake, landslide, rockslide, terrorism or to opt-out from comprehensive fire and allied peril policy.

Calibration And Governance Measures

• In an environment that enables innovation, speed of delivery, and flexibility of operations, the policyholders’ interests must be safeguarded at all times. Broad principles for compliance by the insurers include:

• Board’s oversight and governance mechanism to be strengthened for various stages of insurance contracts from product development, sales, and servicing of the policies.

• Suitability and affordability of customers to be considered in product development avoiding superfluous coverages.

• Pricing of products to factor risk exposure, experience, and expenses such that the premium rates are not excessive inadequate, or unfairly discriminatory.

• Efforts are to be made to incorporate in the product design proper management of underlying risks towards prevention and mitigation in the product design.

• Steps to ensure no unprincipled rate cutting and improper underwriting practices.

• Tech-enabled processes providing end-to-end technology solutions to ensure seamless onboarding, policy servicing, renewal, claim settlement, and grievance redressal.

• To ensure equitable and fair opportunities for the surveyors and loss assessors, work allocation is to be done on a random basis in an automated manner without human intervention through a tech-based solution to be developed by the General Insurance Council in association with the IIISLA (Indian Institute of Insurance Surveyors and Loss Assessors).

Review and reforms to enhance the insurance experience for all stakeholders is a continuous process. “A regulatory environment that empowers the policyholders by bringing about transparency and fair treatment; empowers the stakeholders with ease of operations and facilitates quick adaptation to changing market dynamics is a significant step towards achieving a more inclusive, transparent, and efficient insurance sector in India,” says the Irdai press statement.