The importance of various insurance policies is neither a secret nor difficult to comprehend. An increased spike in the purchase of different but relevant policies to safeguard self, family members and objects proves it. The year 2020, however, will see a series of changes in the outlook of the policies sold in the insurance market. These series of changes will be brought about by the Insurance Regulatory and Development Authority of India (IRDAI) and will reflect in the insurance product structure, pricing, and coverage etc.
The changes by IRDAI will be most beneficial for people living a healthy and wholesome lifestyle, following traffic rules and other preventive measures as it would positively affect the insurance premiums payable. IRDAI will bring about changes that will transform policy designs to better protect the interests of different customers and insuring companies. These reforms, especially for health insurance and policy insurance, are being drafted and will be complete in a few months.
Key features and benefits to IRDAI-
IRDAI, as mentioned, stands for Insurance Regulatory Development Authority of India; it is a governing body which was created to regulate the insurance market with guidelines to protect the interests of the customers and the insurance company: monitoring the insurance industry’s development, growth, services and ethics. IRDAI’s functions are specified in IRDAI Act 1999, under Section 14 and some are as follows:
- To uphold and protect the interests of policyholders.
- Explicitly specifying the code of conduct and training-programs for intermediaries and agents.
- Procedures for issuing, modifying, suspending, withdrawing, renewing and cancellations etc. are all clarified.
- To promote and regulate the efficiency in the conduct of various insurance businesses etc.
Here’s how transformed policies will look like-
Along with the series of changes being implemented, here’s the outlook of the policies in the insurance market:
Time frame taken to settle claims:
One of the major transformations evident in 2020 will be the clearance of claims within a limited time period.
- Surveying losses by assessors are mandatory for claims above Rs. 50,000 for motor insurances and Rs. 1 lakh for other policies. At present, it takes about 30 days for surveyors to assess a claim so as to review and report for the claim to process which inevitably delays claim settlement.
- Therefore, a proposal drafted by IRDAI mentions quicker settlement for motor insurance claims up to Rs. 75,000 by excluding mandatory loss assessment by surveyors. Similarly, for other insurance policies claims up to Rs. 1,50,000 will benefit from this proposal.
- This would reduce the time taken effectively as appointing surveyors wouldn’t be required for the specified claim limit.
Depreciation for motor-own damage and driving-based cover:
It would come across as no surprise that the monetary value of cars and bikes we purchase starts decreasing as soon as it’s taken out of the showroom. This essentially is the meaning of depreciation for motor vehicles and such.
- Only a part of the actual price of the purchased vehicle damaged in an accident, covered under the motor-own damage plan is paid as the claim.
- IRDAI refined depreciation under its drafted proposal for private cars and other such vehicles by eliminating it for the first three years of purchase, i.e., the price listed for the vehicle will also be the sum insured.
- However, by the third year and the fourth 40% value of depreciation will be applicable; progressively, 60% between the sixth and seventh year. As for two-wheelers the sum insured prescribed would be about 95% of the vehicle’s listed price for the first 6 months and notch down gradually to 90% after a year; lastly, 40% for 7 years.
- IRDAI aims to encourage people to purchase cover that protects their vehicle from physical damage. In accordance to this proposal by IRDAI, a working group has also been set-up to link policy premiums with a traffic violation.
Flexibility of health and fitness-oriented benefits:
This change in the outlook of an insurance policy will help avail discounts, offers and benefits provided claim-free policy terms, fitness and lifestyle parameters are met with. Given that the current situation of health premiums payable are based on claims made in a policy term for a specified age group and their medical history of ailments and diseases.
- Up to 5% increase for every claim-free policy term accumulated on health insurance can be availed. A following mention in the proposal will ensure that the sum insured under a standard health policy etc. can be increased every year given the policy gets renewed regularly after each policy term.
- Similarly, another regulation proposed by IRDAI is fitness-oriented discounts. This will provide additional benefits on the premium payable, such as premium discounts on the policy, for those matching the parameters of living a fit lifestyle.
- Moreover, the benefits can also extend to accessing high sum insured compared to others if an active fitness regime is inculcated and maintained.
Flexibility of Life Insurance:
According to IRDAI, insurers should be able to design policy periods, their credit life and other micro-insurance products to provide a range of policy tenures starting from January 2020. This reforms the flexibility in policy terms of various selective life insurance products.
- Additionally, a proposal to extend the revival period of a non-linked insurance policy will also be functional.
- The extension was of 2 years and will be extended to 5 years. These non-linked policies will have a guaranteed surrender value of 2 years.
- However, for unit-linked policies, the premiums payable for the first five consecutive policy terms will be decreased optionally by a maximum of 50%.
- These reduced premiums will not be raised subsequently either.
Exclusions as standardized in different health insurance:
It is a part of IRDAI’s regulations to standardize exclusions in health insurance policies and for this, they provide several circumstances where a health cover cannot be denied.
- Some of these exclusions are cosmetic surgeries without the cause of an accident, mental illness, menstrual-related disorders, genetic disorders and illnesses arising from war/war-like activities etc.
- These exclusions now are more detailed and meticulous as per the proposal. For example drugs, steroids and other stimulants, side effects of anti-depressants and other such medicines impacting the mental and intellectual aspects should be entitled to get covered.
- This might, however, increase the price of the policy to provide the extended coverage and will be a part of the health insurance market.
- It is to be noted that with the expansion of the coverage provided under standard insurance products, an increase in the premium by 10% or more will also be witnessed.
Across the insurance market, in the year 2020, a variety of reforms will be witnessed as imposed by IRDAI (Insurance Regulatory and Development Authority of India). These regulatory changes might bring about an increase of 10-15% in the premium payable due to 18% of GST applicable and other factors like increased coverage, quicker claim settlements and other such benefits specific to the types of insurances. The most benefitted will be those with healthy and rule-abiding lifestyles (like traffic rules), especially under the motor and health insurance sector. Therefore, it would do good to live a considerably healthy and fit lifestyle to avail enhanced facilities at reasonable premiums.