Optima Insurance Brokers Pvt. Ltd.

The Insurance Regulatory and Development Authority of India (IRDAI) in a bid to strengthen governance measures in Insurers’ operations has released a new Master Circular on Operations and Allied Matters of Insurers while repealing 11 previous circulars.

Under this, IRDAI has mandated each Insurer to constitute an advertisement committee, approved by the board of directors, and appoint a senior-level officer of the distribution channel to examine and approve advertisements, to enhance transparency and accountability.

For efficient and speedy grievance redressal of policyholders, Insurers must implement a tech-based robust mechanism aiming for “zero grievances,” ensuring regular customer interface, awareness campaigns, facilitating submission and registration of online grievances with an internal escalation matrix and Ombudsman.

Resolution time is of the essence with an immediate written acknowledgment, if sought further information to be collected once within one week, and the final resolution letter should occur within two weeks.

Advertisements for participating insurance products must disclose the risk factors such as projected bonus is not guaranteed, past performance does not indicate future bonuses and product performance is subject to the insurer’s overall performance.

Insurers must adopt a phygital approach (both physical and digital) to open places of business and make insurance accessible in remote locations of India.

Insurers can outsource permitted activities only if it is cost-efficient and under the oversight of a board-appointed committee.

Policyholders must get an option to avail of services even if and when an insurance intermediary has ceased its association with the insurer.

Insurers must streamline group insurance business with a focus on Insurers issuing a “Certificate of Insurance’ to all members of a non-employer-employee group scheme, consent of nominee/ policyholder/ beneficiary is necessary for repayment of outstanding loan from the proceeds of an assigned policyholder, no claim shall be denied for non-availability of details of members of the group in group Mediclaim policy.

For unclaimed amounts, policyholders can access information with any insurers in one place.

The Insurance Regulatory and Development Authority of India (IRDAI) introduced a comprehensive Master Circular to simplify and modernize the general insurance sector in India as part of reforms and repealed many circulars. The non-life sector will witness the emergence of customer-centric insurance solutions for seamless experience and operational ease for insurers.

Wider product choices and customization will enable customer-centric insurance products and flexibility in covering specific assets, risks, and liabilities.

New Customer Information Sheet (CIS) will provide clear and concise policy details, including scope of coverage, exclusions, warranties, and claim settlement processes for transparency and policyholders’ improved understanding.

Document submission simplification aims to ensure that claims cannot be rejected due to deficiencies in documents. Necessary documents are called for during underwriting, and only essential documents are required for claim settlement if cashless options are unavailable.

Policy cancellation has been eased for retail customers while Insurers can cancel policies only on grounds of established fraud, with proportionate premiums refunded for the unexpired period.

The Master circular aims to expedite claims settlement, by introducing:

Strict timelines: Insurers must adhere to stringent timelines in the appointment of surveyors and in obtaining their reports.

Salvage disposal: Insurers, not customers, handle the disposal of salvage, ensuring policyholders receive their full claim amounts.

Innovative options in motor and home insurance have been included such as “pay as you drive” and “pay as you go” choices, aligning premiums with actual usage.

Recently, NHAI in a workshop on implementation of Insurance Surety Bonds (ISB) for NHAI contracts shared that around 700 insurance surety bonds with a combined value of approximately Rs 3,000 crore have been successfully issued by various insurance companies to date.

Insurers, under ISBs, act as a surety and provide the financial guarantee that the contractor will complete its obligation as per the agreed terms. India’s first-ever surety bond insurance product was launched in December 2022 to reduce the dependence of infrastructure developers on bank guarantees.

NHAI has to date received 164 ISBs which comprises 20 bonds for performance security and 144 bonds for bid securities. To strengthen infrastructure development in the country it is recommended to adopt ISBs as a lead financial instrument.

The insurance surety bonds are equivalent to bank guarantees for all procurements by the government. Hence, NHAI is recommending to all contractors and insurance companies to adopt and utilize insurance surety bonds as an alternate mode for bid security, and/ or performance security submission.