Irda asks insurers to disclose guarantee scheme details

Feature can be offered only after filing with regulator

Insurance Regulatory and Development Authority (Irda) has clarified to insurance companies that they can promote claim settlement guarantee only if they file it along with the product during file and use.

In a communication to the insurance companies, Irda has said while it does not have an issue with companies giving a guarantee for settlement of insurance claims within a certain number of days, these insurers can do so only after making it a part of the product filing.

Several life and general insurance companies offer claim settlement guarantee, promising to pay within seven to eight days on an average, after the claim is intimated.

One of the biggest challenges that the industry faces is delay in the payment of claims. Hence, the companies had instituted this scheme to provide an idea of how many days it takes to resolve claims.

While insurance rules stipulate that the claim, once intimated, has to be settled within 30 days or let the policyholder or their nominees know that an investigation is required. However, on an average, most companies pay the claim within 10 to 15 days unless there are issues such as suspicion in death claim or absence of documents or non-disclosure of facts.

Whatever the case may be, the customer has the right to be informed about the status of their claim within this stipulated time period. If the claim information is not resolved or if the customers are not satisfied with the insurer’s reply, then can contact the insurance ombudsman.

“Many companies have been running campaigns where they also offer some guaranteed interest rate in case payment is not made in the guaranteed period. The regulator has only made it structured by asking them to make these disclosures at the time of product filing,” said a senior general insurance industry executive.

Though insurance companies offer these guarantees, death claims, which require investigation, are usually excluded.

The guarantee period is calculated from the date of receipt of all the requisite documents for deciding on the claim. The interest payment is applicable for death claims of policies which have completed a certain number of years (usually two or three years from the date of policy commencement).

From now on, since disclosures are to be made while filing a product, insurance executives said they have stayed away from offering any such guarantees for new products.

“Once it is filed with the regulator, if there is any delay due to unforeseen circumstances, problems could arise for the company. Hence, insurers are avoiding giving such guarantees,” said a life insurance official.

For customers, it would be beneficial, too. Insurers said this is because once it is disclosed with Irda, the insurance company will have to strictly adhere to it. Unless they do so, such campaigns of offering guarantee cannot be continued.