The Insurance Regulatory and Development Authority of India (IRDAI), recently came out with a circular with a set of guidelines for insurance companies to improve transparency, make insurance policies more comprehensive and customer friendly.
The circular aims to protect the interests of the policyholders against mis-selling. The circular aims to decrease the ambiguity, which would often lead to disputes between the insured and the customer.
The IRDAI announced a set of guidelines on standardisation in health insurance, demanding that insurers should try to extend health insurance coverage to all the persons to be insured who disclosed pre-existing diseases.
The IRDAI has now specified a list of 16 ailments in the list of permanent exclusions. Diseases on this list will never get covered thus ending the ambiguity that existed till now.
The insurance regulator has also specified what cannot be treated as permanently excluded instead of giving the insurers the option to decide. Earlier, if somebody worked in an industry where conditions are hazardous, then the person could be excluded. But now the regulator has spelled out that such a person cannot be excluded.
As per new guidelines, artificial life maintenance, internal congenital diseases, age related macular degeneration, puberty and menopause related disorders and mental illnesses will no longer be allowed to be excluded from health insurance.
If a person makes a detailed declaration about pre-existing diseases on the proposal while buying a health insurance policy, these guidelines now offer additional clarity to insurers in terms of which diseases can be permanently excluded and also bring in transparency as the customers will know what will be covered under the policy.
IRDAI has further clarified that the waiting period on temporary exclusions cannot exceed 48 months. If customer is porting from one insurer to another and if out of the total waiting period of 48 months, if he has already completed 24 months, then the new insurer cannot impose a waiting period of more than 24 months for that disease.
Insurance companies will now have to provide benefit illustrations to customers at the point of sale. The buyer and the sales intermediary will both have to sign the illustration and it will be part of the policy document.
The CEO and the appointed actuary will have to approve all illustrations in future. It has mandated that the illustrations must specify clearly which portions of the benefits are guaranteed and which are non-guaranteed.
In case of variable benefits, two rates of return 4 percent and 8 percent have to be assumed, and it has to be clearly stated that these are not guaranteed, nor are they the upper and lower limits of the return that the product can be expected to give.
The insurance regulator is trying to simplify and standardise the format and thus ensure that customers fully understand the benefits they will get from the insurance product they are buying.
IRDAI further mandated life insurers, agents and intermediaries to collect suitability information of every prospective policyholder and offer tailored product recommendations accordingly.
However, this would not apply to pure risk and pure health products. According to the circular, the information will include details such as age, income, family status, life stage, financial goals and the already held insurance portfolio.
IRDAI has now stated that insurers must make sure that travel portals do not make travel insurance a pre-selected option. The regulator has now mandated that there will be a provision to allow the person to be insured buying a travel cover go through the benefits, terms and conditions offered under the travel insurance cover on the screen itself.
The person’s consent shall be obtained by getting them to select a radio button by the travel insurer so as to confirm that they have read and understood the terms and conditions.
IRDAI has mentioned that the premium should not be received more than 90 days in advance to the date of commencement of the risk covered in case of domestic travel or along with the ticket while purchasing the travel tickets. However, travel insurance for overseas travel can be issued at any time.