All you need to know about Insurance

All you need to know about insurance
September 08, 2010 12:58 PM


Moneylife Digital Team
Source: http://www.moneylife.in/article/76/8947.html

New products, regulations, features and options, interpreted from your perspective

IRDA Guidelines for Grievance Redressal

You may have already seen the Insurance Regulatory and Development Authority's (IRDA) advertisements in leading newspapers to encourage anyone having an unresolved grievance with any insurance company to contact the IRDA grievance call centre number (toll-free 155255) or email (complaints@irda.gov.in).

IRDA has now issued grievance redressal guidelines for insurance companies. These are quite useful for policyholders. According to IRDA, insurance companies must have a system and procedure for receiving, registering and disposing of grievances at each of their branches. They should also send a written acknowledgement to the complainant within three working days of the receipt of the grievance. The acknowledgement should not only contain the name and the designation of the officer who will deal with the case but also the time taken for resolution of the dispute.

Every insurer will have to appoint a grievance officer at the senior management level. Each type of grievance has to have a definite turn around time (TAT) set by insurers within which it needs to be resolved. Failure to follow the procedures or violation of the timeframe will attract penalties from the regulator.

According to the IRDA guidelines, the insurer should resolve the grievance within two weeks of its receipt and send a letter of resolution. If the dispute is not resolved in two weeks, the company should send a written response to the complainant offering redress or rejecting the complaint and also giving reasons for doing so. The insurer should also inform the complainant about how he or she may pursue the complaint, if dissatisfied. The complaint can be regarded as closed if the complainant does not respond to the insurer within eight weeks of the company's written response.

The regulator has also emphasised that it is necessary for insurers to have automated systems that would enable online registration and tracking of the status of grievances. The system should be integrated seamlessly with the regulator's system. The insurer should publicise its grievance redressal procedure and ensure that it is specifically made available on its website. There should be a system to receive and deal with all kinds of calls, including voice and email relating to grievances.

SBI Life Insurance Penalised

The insurance regulator recently slapped a penalty of Rs10 lakh on SBI Life Insurance Company Ltd. One of the specific violations involved the insertion by the insurer of two clauses in the policy document 'Super Suraksha' after the clearance of the policy document by IRDA under the 'File and Use' process. One clause denied the payment of death claims in the event that death occurred within 45 days from the date of commencement of the policy and the other clause enabled the insurer to reject the claim in the event of intimating the death claim 90 days after the date of death. Such insertions, after the policy document was cleared under the 'File and Use', not only amounted to serious misdemeanour but also resulted in the violation of the 'File and Use' Guidelines issued by IRDA. It has serious ramifications affecting the interests of policyholders at large in that the alteration of the main terms and conditions of a product was clearly a serious breach of trust reposed in the insurer by its various stakeholders.

Too Many Holes

If you are working for a large organisation, you are most likely to have benefited from group insurance. Unfortunately, you will now get reduced coverage. Indian companies are cutting back on healthcare benefits. Software companies, that earlier had liberal employee health insurance packages, are reducing benefits by dropping health cover for parents as part of group mediclaim policy, according to a survey. While introducing the co-payment clause - entailing sharing the premium payment or claim amount by the employee - has become a prevalent practice, some companies (around 30% of the over 100 surveyed) have chosen to withdraw such covers entirely. Compared with the 60% of companies that picked up the entire expense pertaining to parents' cover as per the last survey, the figure has dropped to 50% this time.

During the pre-recession period, when attrition was rampant, many IT companies offered covers even up to Rs7 lakh for their key personnel and their elderly parents in a bid to attract and retain talent. Many opted for expensive treatments such as knee- and hip-replacement surgeries, often leading to a high claims ratio. Over 65% of the corporates surveyed reported a claims ratio in excess of 100%. A high claims ratio results in higher premium payable the following year, as health insurers are bound to hike the premium rates.

The study notes that 73% of corporates are likely to re-evaluate the benefits offered to keep costs under check and make changes such as introducing preventive care, tweaking parental coverage terms, bringing in sub-limits for room rates, treatment of certain ailments, etc, or even dropping dependent coverage completely.

One of the reasons is the hike in premium rates for group insurance, following very high claims earlier. Insurance companies are losing a lot of money, thanks to group insurance claims leading to higher premiums. According to the Comptroller and Auditor General (CAG), during three years - 2006 to 2009 - four public sector insurance companies suffered a loss of Rs417 crore on individual portfolio and Rs622.49 crore on group policies. The CAG pulled up these insurers for incurring huge losses on group mediclaim policies.

The CAG said that the premium earned by the government insurers nearly tripled to Rs3,696 crore in 2008-09 from Rs1,321 crore in 2004-05. This did not obliterate their losses on group policies. It also noted that some of the big corporate houses, despite having their own group company in general insurance business, took policies from government insurers (labelled PSU insurers). The report said that against Rs11.74 crore premium collected from Tata Consultancy Services, claims paid only for domiciliary hospitalisation were a staggering Rs71.64 crore. "Despite its own group company being in the health insurance business, TCS, Tata Motors and Tata Power went for group policies with PSU insurers," it said.

"The PSU insurers should have increased the premium of the policies when they come up for renewal every year, but they did not do this with respect to group policies resulting in a loss of premium of Rs329.68 crore for three years ended 31 March 2009," CAG said.

The report said the group policyholders were given additional benefits such as maternity, post-natal care, pre-existing diseases among others, without charging additional premium. The CAG also pulled up the insurance companies for failing to monitor the quality of services offered by the third-party administrators to the insured which, in turn, impacted customer satisfaction.