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Regulatory changes keep insurers on toes in 2018; product changes will dominate 2019

From tax deduction benefits for senior citizens to mandatory long-term third party motor insurance, here's what the insurance sector witnessed in 2018.

December 20, 2018 / 11:28 AM IST

Insurance companies witnessed a slew of regulatory changes in the sector in 2018. These included changes in the product structure in life, health and motor insurance products that impacted the way these features were structured in the policy.

The major changes -- both implemented and proposed -- have an impact on the existing and potential policyholders.

Here are the top developments in the insurance sector in 2018

Tax deduction benefits for senior citizens

The union budget increased tax deduction benefits for elderly people, which will offer dual benefits to retired citizens. This benefit include a health cover providing medical treatment expenses incurred on specified diseases for senior citizens to Rs 1 lakh and tax savings of up to Rs 50,000 under Section 80DDB of the Income Tax Act at the same time.


Previously, a taxpayer could maximise tax benefit under Section 80D to a total of Rs 55,000 if his/her age is below 60 years, while parents' age is above 60. For those taxpayers who are above the of age 60 and are also paying health insurance premium for their parents, the maximum tax benefit would be a total of Rs 60,000 under section 80D.

The table below can be referred to while claiming tax deductions under section 80D for FY 2018-19.

health chart update

*Above age 60 refers to a senior citizen in the above context

Long-term third party motor insurance made mandatory for cars, bikes

The Supreme Court made it mandatory for all car owners to take three-year motor insurance cover and five-year cover for bikes, from September 1. This led to an immediate increase in the price of motor insurance policies and hit auto sales since the covers were made mandatory.

Devendra Rane, Founder and CTO at said that vehicle owners get cover for a longer period along with freedom from the hassle of yearly renewals, the insurers got a chance to rein in the lapsation ratio. "However, vehicle owners will have to bear the higher outflow of premiums right at the time of purchasing their vehicle," he said.

Compulsory personal accident cover for owner-driver

The Insurance Regulatory and Development Authority (IRDAI) also gave motor vehicle owners a reason to cheer. The mandatory third-party insurance cover along with personal accident cover for vehicle owners-drivers has been unbundled. Personal accident cover -- which was mandatory in every third-party insurance cover -- will now be available as a standalone policy and you only need to buy it once, as opposed to for every vehicle you have owned earlier.

Proposal to trim health insurance exclusions

Insurance Regulatory and Development Authority of India (IRDAI) released a report on standardisation of exclusions in the health insurance space. On one hand, this was intended to improve transparency in the sector, but on the other, there is a fear that riskier customers would be excluded from the system.

Life insurance plans to see makeover

In its draft regulations on life insurance products released in November, IRDAI has said that companies will be able to offer flexible policy tenures for certain products. IRDAI said that insurers can design term, credit life and micro-insurance products that have a range of policy tenures to choose from. However, these regulations would mean that insurers will have to withdraw existing products and re-launch new ones with appropriate features.

Ayushman Bharat launched

The government launched the Pradhan Mantri Jan Arogya Yojana in September 2018. Under the scheme, also called Ayushman Bharat or Modicare, about 10 million families (50 million people) will get access to Rs 5 lakh worth of health insurance free of cost. This will include families from lower income groups that fall under the socio-economic caste census (SECC) data of 2011. This will be the largest such scheme in the world.

According to Dhirendra Mahyavanshi, Co-Founder of Turtlemint, "The new Ayushman Bharat scheme is an initiative which has been implemented by the Government of India which addresses the health care problem of the economically backward class of India. This scheme promises free health insurance coverage of up to Rs 5 lakh (on a family floater basis) to designated economically backward class individuals."

New chairman IRDAI chairman

In May 2018, Subhash Chandra Khuntia, a 1981-batch Indian Administrative Services (IAS) officer and former Karnataka chief secretary, was appointed as IRDAI chairman for three years. The post was vacant for over two months after TS Vijayan's tenure came to an end on February 21. The first task for Khuntia was to look into the deal where Life Insurance Corporation of India (LIC) was to hold majority stake in IDBI Bank. IRDAI cleared the deal.

What to expect in 2019

The year 2019 is expected to bring out more technology-linked products into the insurance sector. Here is a look at the top trends for 2019:

Use of wearables in insurance

Insurance companies may soon require you to buy a fitness tracker to capture your health status in an accurate manner. An IRDAI committee has recommended that insurance companies make use of activity data monitored by fitness trackers in pricing their products.

Although it is currently not clear if the cost of these trackers will be borne by the customer or insurance companies. If the recommendations are taken on board, it will mean lower premiums for people adhering to a fitter lifestyle.

Insurance on pilot mode

IRDAI will allow companies to test products in a particular geography, or among a set of policyholders before they are made available in the market. Using a sandbox method where products can be tested, IRDAI Chairman Subhash Khuntia said that if they are successful, such products can be filed for approval. So insurers may begin testing products within a close group of customers to get their views and to ascertain the commercial viability of the product.

New capital norms

In the future, insurance companies will have to maintain capital depending on the type of business that they write. This will be called risk-based capital (RBC) regime. If a company writes riskier business, they will have to maintain more capital in their reserves. IRDAI is expected to bring out a detailed timeline on how RBC will be implemented and the processes to be followed by insurers for pricing each risk.

Mental Health insurance products to be widely available

While the Mental Healthcare Act was passed, offering insurance for mental ailments was made mandatory by law. However, due to a lack of clarity on the product structure, insurers stayed away from offering these products. In 2019, insurers could bring out products with a series of inclusions and exclusions. Even therapy sessions will be covered.

Digitisation of insurance products

IRDAI may make it mandatory for insurance companies to offer insurance policies only in a digital format. This will be done through the use of insurance repositories where each policyholder will have an electronic insurance account with a unique identity number. Currently, the number of digital insurance policies are very low since it is optional for a wide category of products.
M Saraswathy
Navneet Dubey
first published: Dec 20, 2018 08:00 am

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