Draft norms issued forclaims payment in parts

A proposal under which insurers will pay in instalments claims pertaining to personal accident and benefit-based health policies is gathering momentum with insurance regulator IRDAI announcing the draft guidelines.

In doing so, the regulator has sought to go with the recommendations of a working group which, among others, emphasised that payment of the claims in instalments should not be a default option.

“It shall be in addition to the lump-sum option and shall be allowed based on the option exercised by the policyholder,” said the exposure draft. The guidelines proposed touch on different aspects, including suggesting the need for offering a combination of both options – a portion of the sum assured as a lump sum payment at the time of claim and the balance in instalments – as well laying down a maximum time frame of five years for claim payments in instalments.

The guidelines also suggest a uniform premium rate, irrespective of whether the claims are sought to be accessed by the customer in instalments or lump sum. Further, the total claim amount payable in instalment option will always be higher than the lumpsum option.

Linkage to interest rate for payment of claims in instalments is not permitted, the draft said.

The claim payment in instalment option may, however, be offered only beyond a certain threshold limit of the base sum insured and subject to the design of the product. The working group was constituted by IRDAI following proposals by some insurers seeking permission to settle claims in instalments.

The logic extended for allowing settlement in instalments is that the claim will serve as an income in the hands of the claimants for a reasonable period of time. In the case of benefit-based health insurance policy holders, it would help get a stream of income over a predetermined period of time post triggering of claim. The guidelines would apply to personal accident policies issued by general and health insurers and benefit-based health policies issued by all insurers.

Some of the other aspects dealt with in the draft exposure pertain to the level of flexibility that will be available to the policyholder to make a decision and alter the same; nomination and change in nominee; pricing of the policies; and disclosure norms.