Here's how IRDAI is ramping up measures to protect consumers

In a series of recent moves, the Insurance Regulatory and Development Authority of India (IRDAI) has shifted focus towards ensuring the interests of consumers are protected.

In what would come as a major relief, the insurance regulator has said insurers will not be allowed to reject claims based on presumptions and conjectures. In case a claim is rejected the insurer has to clearly communicate the reason and point out the corresponding policy term to the policyholder. The insurer will also have to provide details of the payments made, amounts disallowed and the reasons for the amount disallowed.

On the health insurance front, the IRDAI has specified that insurance companies cannot alter ongoing health policies in a manner that result in significant change in premium. The regulator has directed insurers to take actuarial assistance to assess viability of health plans at the end of each year to ensure sustainability.

Health insurance policies have resulted in huge run-ins between insurers and insured during recent month as insurers have repudiated claims related to hospitalisation caused by Covid-19. Several policyholders have been hit financially as a result. The regulator’s directive that insurers must clearly specify the reasons for rejecting claims is a welcome step as it will bring in transparency and also reduce disputes leading to appeals before the Ombudsman or consumer courts. A detailed reasoning and documentation of facts by the insurer will ease the stress on the consumer and help minimize friction.

Health insurance consumers would give a definite thumbs up to IRDAI for its directive to insurer to not to modify any existing benefit or introduce a new benefit in a health insurance policy which would lead to an increase in premium. Over last one year, insurance companies have made many modifications to their policies because of which the premiums have gone up rapidly. In fact, over a couple of years, there are instances when the premium jumped multi-fold forcing policyholders to not renew the policies. This new directive will certainly put a leash on the companies which are prone to taking anti measure that go against for consumer interest in the guise of providing better and enriched covers.

In a separate consumer-friendly move linked to the health space, IRDAI has joined the battle against the Covid-19 pandemic by nudging insurance companies to get proactive in facilitating eligible policyholders to get vaccinated against Coronavirus, either in group or individually. It has asked companies to make arrangements for policyholders by pre-booking immunization slots and sending reminders on the due date for second jab of vaccine.

Insurers have also been advised to provide for hospitalisation expenses in case the vaccination leads to adverse reaction.

The recent directives by the IRDAI come after its moves towards standardisation of policies which has made it easier for consumers understand policy terms before purchasing them. For example, earlier the regulator had asked insurers to offer standardised health insurance policy – Arogya Sanjeevani Policy with a sum insured between Rs 50,000 to Rs 10 lakh, instead of Rs 1 lakh to Rs 5 lakh, earlier. The regulator has clearly sent the message that it has its finger on the needs of the people, especially during the pandemic times.

In aggregate, the recent directives and measures present the IRDAI as a regulator with an eye on consumer needs but also show that it is conscious of its role in wider health issues.

Insurance, as a sector, is prone to mis-selling, claims rejections, disputes and litigation, all of which have an adverse impact on the image of the industry. However, it must be said that insurance companies are not always at fault. There are rising incidence of frauds and fraudulent claims that remain a threat to their businesses and against which they must take all possible precautions. Transparent functioning by companies backed by clarity in regulations will go a long way in smooth functioning of the sector and create greater awareness of insurance products and increase their penetration.