The Insurance Regulatory and Development Authority of India (IRDAI) is reportedly planning to introduce an option that allows policyholders to receive their claim settlement in installments. The insurance regulator is considering this option for certain types of policies including benefit-based health insurance claims and personal accident covers. This is mainly to ensure that beneficiaries have access to steady income following the occurrence of an unfortunate event.
A working group set up by the IRDAI to study this new plan submitted its report in January. Based on the results put forth by the study, the regulator has provided draft guidelines and has asked stakeholders for their opinions on this new development. As per the draft guidelines, policyholders will be provided with the options of receiving the settlement amount in lump-sum payment, equated installments, or a combination of both.
The guidelines noted that insurance companies must figure out a way to get the options chosen by policyholders at the time of policy sale and during the course of the policy terms.
The guidelines also recommended that the claim settlement period can be a maximum of 5 years and all equated installments associated with an insurance cover can be spread across this period. IRDAI did not recommend any change in premiums for choosing different options. The total payout for installments, however, is likely to be higher than the lump-sum payments.
IRDAI believes that this change will provide beneficiaries with the option of having a regular income in the case of an unfortunate event. Moreover, the regulator has asked insurers to make the benefit structure clear to customers in simple language to help them make an informed decision when buying a new policy. IRDAI has asked all stakeholders to comment on these draft guidelines by 17 April 2019.
Source: Economic Times