Changes in the Regulatory Framework of Insurance Policies Due to Pandemic

2024-08-02

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The prevailing COVID pandemic has impacted not only individuals and families but also the business world and the economy on an unprecedented scale. Of particular concern is the insurance sector. This sector is expected to face the challenge by quickly devising new products for catering to the protection of various types of life insurance seekers.

With the entry into the second phase of lockdown 3.0, the IRDAI (Insurance Regulatory and Development Authority of India), as well as Indian insurance companies, have been allowed to function, subject to the implementation of required social distancing and precautionary measures.

The pandemic era has led to problems for the policyholders as they struggle to make payments of premiums and ensure continuity of their policies, which they need most in such uncertain times. Additionally, traditional distribution channels of insurance involving in-personal solicitation have been affected. But in the long run, social distancing norms will surely give a push to online and distance marketing channels for insurance sales.

The situation is being monitored pro-actively by IRDAI, and it has come out with some measures to help the insurance sector and its policyholders. The following are the fundamental changes introduced by the IRDAI in the applicable regulatory framework:

MARCH 4, 2020 - GUIDELINES ON HANDLING OF CLAIMS REPORTED UNDER CORONA VIRUS BY IRDAI

According to this circular, the IRDA has directed insurance companies to promptly settle COVID-19 related hospitalization claims and offer coverage for allowable medical expenses during the quarantine period according to policy terms. Such claims may be disallowed only following a thorough examination by the review committee of insurance claims.

Insurers have been asked to design products that will help allay treatment costs for Covid-19 and meet health needs for various sections of the population. As such, they have come out with some unique products for the individual as well as groups. These include cover for corporate travel when the pandemic subsides.

MARCH 23, 2020 - IRDAI CIRCULAR ON ‘COVID-19 GLOBAL PANDEMIC RELATED INSTRUCTIONS TO LIFE INSURERS’

According to such instruction, the IRDAI has covered four issues:

Functioning of offices
Grace period for payment of premiums
Claims and
Periodic reports.

About partial or full closure offices, the IRDAI has indicated providers of life insurance policy for notifying policyholders by e-mail, SMS, Press releases etc. apart from notifications on the branch office. Life insurers were additionally directed to showcase on their website, a list of non-functioning offices, and alternate arrangements for servicing policyholders, contact details for any emergencies, information on Covid-19 death claims and specific information on the admissibility of claims under health insurance contracts.

The IRDAI also allowed an extra grace period of 1 month for premium payments of all life insurance policies, due in March 2020. Insurers have also been asked to maintain data on Covid-19 claims, separately which have to be submitted to the IRDAI when asked for. For superior monitoring of Covid-19 scenario, insurers have been directed further by IRDAI to submit reports on offices closed partially/ fully and other steps taken, every fortnight.

MARCH 30, 2020-COVID 19 RELATED INSTRUCTIONS FROM IRDAI

These are comprehensive instructions on the Pandemic situation, issued to all classes of insurers. The IRDAI has urged insurers and other regulated bodies to operate their offices with only required staff such that essential insurance services like claims settlements, renewal of policies, authorizations for hospitalization and other such activities. The regulatory body has also instructed office staff of insurers to work from home, including intermediaries and agents.

Insurers have also been asked to display on their website, a dedicated helpline number for policyholders and another helpline number for other stakeholders such as intermediaries and agents. Additionally, insurers have been asked to come up with business continuity plans that deal with processes, reporting, transactions and customer services to be handled seamlessly, concerning present situation. A copy of the plan must be submitted to the IRDAI.

APRIL 1, 2020 AND APRIL 15, 2020-MINISTRY OF FINANCE NOTIFICATIONS/APRIL 3, 2020 AND APRIL 16, 2020 IRDAI CIRCULARS

Under such notifications, policyholders whose third-party motor insurance and health insurance are due for renewal during March 25, 2020, to April 14, 2020, were given an allowance to make premium payment till April 21, 2020, to ensure continuity of such covers from the date on which the policy comes for renewal.

The IRDA also clarified that insurers must cover risk in cases where renewal premiums are due but could not be paid for.

APRIL 4, 2020-IRDAI CIRCULAR

According to this, the IRDAI permitted an extra grace period of 30 days for all life insurance premium payments due in March and April 2020. To protect policyholders of best life insurance from a volatile market, for policies maturing up to May 31, 2020, the IRDAI ordered insurers to offer policyholders with a one-time option to avail of settlements as per Regulation 25 of IRDAI.

APRIL 8, 2020-IRDAI CIRCULAR

The RBI (Central bank) issued directions on moratorium for repaying term loans to reduce difficulties of borrowers. So, the IRDAI allowed insurers to grant a moratorium of 3 months for paying instalments which were due between March 1, 2020, to May 30, 2020. The repayment schedule would be shifted by 3 months in term loans.

APRIL 13, 2020 AND APRIL 24, 2020

The IRDAI outlined the severe financial implications which lie ahead for the insurance industry. It enjoined that board of directors of insurance companies critically examine their solvency margin and capital availability as needed in the current financial year 2020 to 2021. They must devise strategies to ensure that they have enough resources and capital available with them.

APRIL 16, 2020- CIRCULAR OF IRDAI

The IRDAI repeatedly stressed that medical insurance is mandatory for all workers in establishments which are active during the nation-wide lockdown.

APRIL 18, 2020- CIRCULAR OF IRDAI

For easing pressure on health care infrastructure during the pandemic, the IRDAI indicated to all insurers that decisions on the authorization of cashless treatment are communicated to the network provider hospital within 2 hours of receiving the authorization request and last necessary request from the hospital, either by the insurer or TPA (Third Party Administrator).

Since life has been turned upside down by the pandemic for insurers, policyholders, insurance agents and other stakeholders, it is expected that the IRDAI will continually monitor developments closely and take suitable measures for steering the ship in stormy waters.

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