Policyholders can choose whether they want claims as a lumpsum or on an installment basis
Benefit-based health insurance products and personal accident plans should allow customers to make claims in instalments, according to a working group set up by the insurance regulator. The periodicity of such instalment can be either monthly or quarterly or bi-annual or annual basis.
However, this facility must only be offered if a customer gives explicit consent for the same. In fixed-benefit plans where a policyholder is paid a lump sum amount on detection of illness can now choose if they want all the money at once or on a regular basis.
The working group chaired by Insurance Regulatory and Development Authority of India (IRDAI) executive director (health), said specifying a cap on the maximum number of claim instalments would help in ensuring uniformity across the industry.
"It is recommended that the claim payment period can be capped up to a maximum of 5 years as per the needs of the target customers," the working group said in a report.
Such a facility provides a secure and regular income over a defined period of time, the report stated.
It added that installment payments are best suited where a policyholder being the sole bread-earner of the family is struck with a grave or total permanent disability.
"It is a safe option in the scenario where the beneficiary is not well versed with the financial market. He/ she would find it difficult to manage a large sum of funds received in a single payment. A wrong financial decision/advice can lead to irreparable loss," said the report.
Further, the working group said the periodicity in claim payment is beneficial in situations where there is a defined periodic liability, say monthly/quarterly/half yearly need such as for a child’s education with no other fixed source of income.
It is also expected that the pricing of these products would be different for these instalment-based insurance plans compared to the others. The insurers should ensure the products stay attractive for policyholders.
On the basis of the feedback received, IRDAI will form regulations with respect to offering claims in instalments.
