The year 2022 saw several important consumer-friendly regulations in the insurance sector. We look at some of the landmark rules adopted by the government for the insurance industry.
Insurers were advised to ensure the settlement of all Ombudsman awards pending for more than 30 days. What does it mean for customers?
“It should generally be beneficial to the customers as they would receive compensation awarded by the Ombudsman,” says Bahroze Kamdin, partner at Deloitte India.
In a circular dated May 26, 2022, the Insurance Regulatory and Development Authority of India (IRDAI) directed the insurers to implement the awards issued by Ombudsman within 30 days as required by rule 17(6) of the Insurance Ombudsman Rules, 2017. As per the circular, there were 711 awards which have not been complied with by the insurers.
If the insurers do not agree with the award, then they can appeal against the Ombudsman order and inform the complainant and the Ombudsman.
The insurers must also file monthly statement of the status of the Ombudsman award. If the insurers have not filed an appeal within 60 days on the receipt of the Ombudsman order, they must pay an amount determined by the Ombudsman immediately to the complainant as per the rule. This can be ascertained from the monthly statement filed by the insurer with IRDAI.
“However, it is not clear whether the insurance companies have preferred appeal against these 711 awards and specially if 162 awards are pending for more than one year. Considering the reporting of the status of the Ombudsman awards, IRDAI may issue an updated circular providing information, insurance company wise, on whether the awards have been challenged in appeal or not,” he adds.
Introduction Of New Add-Ons In Motor Insurance
IRDAI has permitted general insurance companies to introduce the following tech-enabled concepts for the Motor Own Damage (OD) cover:
i) Pay as you drive
ii) Pay how you drive.
IRDAI issued a press release on July 6, 2022, to provide for a tech-enabled add-on to the basic own-damage motor car policy.
"Pay-as-you-drive should be beneficial to customers as those who don't drive the car much will pay insurance according to the mileage. If you drive less, then the premium will be lower. Presently, the premium is based on the type of car, make, year of make, and fixed rate depreciation but not linked to the mileage driven by the car.
"Now, with technology, the premium will be based on the usage of the car. This will require some telematic device being fitted in the car that would provide information on the kms driven by the car according to which premium will be paid. This should provide relief. There may be an initial cost for the telematic device to be fitted in the car," says Kamdin.
Pay-how-you-drive also should be beneficial for those customers that are safe drivers.
No claim bonus is already provided as a discount by the insurance companies, provided there was no claim in the preceding year. Now with technology telematics fitted in the cars by the insurers, how safe the vehicle is driven and based on the data analysis, the premium will be calculated.
“It appears that this type of policy may or may not be cheaper than the traditional motor car policy. If the driving behaviour is rash, the premium could increase, while if the driver behaviour is safe, the premium could reduce. Whether this reduction will be more than the discount for the “no claim bonus,” he adds.
Plans For An Aggregator-Like Platform
IRDAI approves the plans for Bima Sugam, an aggregator-like platform that will allow insurers to sell products directly to customers online, lowering costs and altering the distribution process
Bima Sugam will be an online platform where customers can buy and get services, and insurance companies can settle claims for various products. Bima Sugam should be like an insurance exchange where you get information on policies of various insurance companies (life, general, and health), the way the stock exchange lists, price, and share information of stocks of listed companies.
Kamdin says this could benefit customers as the premium on the Bima Sugam should be less than the premium sourced directly. The distribution cost should reduce for the electronic purchase of policies. Also, companies may give additional pricing discounts on Bima Sugam to attract policyholders. IRDAI should regulate pricing, discounts, etc., of the policies sold on the platform. Claim settlement should also be through the online platform. Whether this would lead to insurance policy portability needs to be seen.
National Securities Depository Limited (NSDL) (Hyperlink NSDL: https://www.ndml.in/nir.php) is an online insurance policy repository that holds insurance policies electronically. It may be linked to Bima Sugam for opening the electronic account for insurance policies purchased through Bima Sugam.
Health Insurance Cover To New Born/Infants
Insurance products that cover newborns/unborns shall provide coverage from day one without any waiting period. Internal congenital diseases, genetic diseases, or disorders will not be allowed to be incorporated as exclusions in the terms and conditions of the policy contract.
Mental Health Cover
IRDAI directed insurance companies to cover mental illness under health insurance policies before October 31, 2022. "All insurance products shall cover mental illness and comply with the provision of the MHC Act, 2017, without any deviation. Insurers are requested to confirm compliance before October 31, 2022," IRDAI said. This health insurance reform clearly benefits people suffering from mental health problems.
