Last Updated : Oct 13, 2018 06:52 PM IST | Source:

OPINION | Insurance payouts in instalments defeat the purpose of buying a cover

Payment of insurance claims in instalments will lead to lower financial support for families in dire need of lumpsum money

M Saraswathy @maamitalks

Savita Parameshwaran, a 64-year-old homemaker from Kolkata, was diagnosed with a liver ailment and her family was trying to get the insurance claim passed quickly to begin the treatment on time. While the health insurer took almost two weeks to process the claim, Parameshwaran was admitted to a top hospital using the insurance money.

Now imagine what would have happened if her family did not get the money or time or got only a portion of it. This is exactly what could happen if a proposal by general insurance companies is accepted by the regulator.

These insurers have sought a nod from Insurance Regulatory and Development Authority of India (IRDAI) to pay benefit-based health insurance and personal accident claims in instalments. This will mean that if you are to receive Rs 10 lakh as claims, the insurer will pay it in a series of monthly instalments over a period of time.

For customers who require immediate financial support, payments in instalments may not be appropriate.

A serious ailment like cancer, for example, can set one back by a few lakh rupees. Getting the pre-hospitalisation tests done, chemotherapy as well as the necessary surgeries, cost anywhere between Rs 5-20 lakh depending on the type of cancer and at what stage it is diagnosed. Here, getting a small sum of money every month serves no purpose.

Further, in case of a permanent disability, the insured would need a large sum of money to not only manage the medical expenses but for the daily living expenses since he/she may not be able to get any employment during this period. Another area of concern is that if the person dies due to inadequate medical treatment, will the family receive the balance payment?

For insurance companies, their claims outgo can be minimised by payment on instalments. They wanted this change so that after the partial claim is paid, the rest of the claim amount can still be invested into debt and equity instruments. However, it is not yet clear as to how this will be accounted in their profit and loss account.

In life insurance products, the nominee receives the benefit but this is not the case with general insurance. The policy is issued in the name of one person and ceases to exist if he/she dies. There is also no clarity on whether an insured can midway increase the instalment claim receivable if you are in a financial crunch.

At a time when Indians are slowly understanding the need for insurance and buying policies without any push, having restrictive payout conditions will only dissuade people from purchasing a cover.
First Published on Oct 13, 2018 06:26 pm
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