Regulator Irdai is mulling giving policy holders an option to receive payment of claims in installments under certain policies like personal accident (PA) and benefit-based health insurance.
The Insurance Regulatory and Development Authority of India (Irdai) had set up a working group to study a proposal in this regard and the panel had submitted its report in January this year after examining the concept of settlement of personal accident and benefit-based health insurance claims in installments.
Now, the insurance regulator has come out with draft guidelines and sought comments from stakeholders.
Irdai is of the view that the option of settlement of claims in installments will ensure that claimants have regular income for a reasonable period of time upon happening of a contingent event.
The draft guidelines said the policyholders may be provided an option of choosing either settlement of claim in lump-sum or in equated installments, or both in parts.
Further, insurers should put in place a procedure to capture the option exercised by the policyholder at the point of sale and at various stages of the policy.
“A combination of both the options i.e. a percentage of the sum assured as a lump-sum payment at the time of claim and the balance sum insured in installments for a definite period of not exceeding the time limits…may also be offered as a part of product design,” the draft said.
As per the draft guidelines, the claim payment period of the product could be maximum of five years and “the claim installments shall be spread during claim payment period”.
Also, the premium rate for the both the options should be same, Irdai said, adding “the total claim amount payable in installment option shall always be higher than the lump-sum option”.
To safeguard the policyholders’ interests and to enable them in taking an informed decision, the draft said the policy wordings relating to the benefit stricture should be in simple language and clearly defined.
Stakeholders can offer comment on the draft guidelines by April 17, 2019.