Under the new regulation, insurers are asked to regularly update applicants about the processing status. This will bring transparency to policies, where there is a medical underwriting or physical inspection involved.
Recently, an HR executive at one of our corporate clients sought help to renew her car insurance. Her policy had already lapsed, but she did not receive a renewal reminder from her insurer. To be sure, she double-checked her inbox. Like many of us, she may have ignored calls from unknown numbers.
Later, she found out that her email ID was not updated in her policy. In a world, where the restaurant delivery company insists on your email ID, insurers often do not. Historically, policy servicing communication has been found wanting at the insurer’s end. This has probably prompted the regulator, the Insurance Regulatory and Development Authority of India (IRDAI), to put specific guidelines in place for insurers to follow during the entire life cycle of the policy.
According to the new circular, insurers are required to collect the phone number and e-mail ID of the policyholder when the policy is bought and regularly update the same. Insurers have to offer a mechanism for policyholders to update their contact details electronically, both via the website and their mobile app. It still remains voluntary for the policyholder to provide this information. At the outset, it seems a rather basic provision.
However, a quick glance of several insurers' websites will tell you that this facility does not exist today. So far, collecting the contact details of the insured was at the discretion of the insurers. It now becomes a regulatory expectation.
If an insurer does not have the contact information of its clients, it will have to explain to the regulator that an earnest attempt was made by them to collect it. This will naturally lead insurers to tighten their systems. Renewal rates will definitely go up, but it will have an impact on other areas as well.
The first of such areas will be the proposal stage. In some cases, an insurance underwriting process appears as a black box to the lay person. You do not know when you will hear back and what’s going on with the application. Under the new regulation, insurers are required to regularly update the applicants about the processing status. This will bring transparency to policies where there is a medical underwriting or physical inspection involved.
The applicant should now get a better view on when the application now moves from the insurer’s third party service provider to its own underwriting desk. However, regulations should further specify the turnaround timelines for an insurer to review an application. In case a negative outcome is on the cards, it is better for an individual to know it sooner.
Another area that should benefit from these regulations is greater awareness about policyholders’ rights. IRDAI has advised insurers to help increase awareness of insurance among their customers. Insurance firms are required to send periodic messages.
Aside from general awareness, such messages should caution policyholders about fraudulent insurance-related calls. Before sending any notification about the services offered by the insurance company, the company should seek the customer’s consent.
Insurers are discouraged to send promotional content. The scope seems largely limited to the product already sold. We can expect that insurers will take this opportunity to inform policyholders about ways to utilise the policy.
Finally, the claim experience of policyholders should be improved from these regulations. Already, there were prescribed timelines for claim processing. For instance, in the case of a property claim, the survey should be started within 48 hours of the appointment of the surveyor. An interim report about the loss suffered should be communicated to the insurer within 15 days from the date of the first survey. The final report should be submitted within 30 days of the appointment of the surveyor.
In the case of commercial or large risks, the time limit has been increased to 90 days. However, these guidelines are sometimes not met. Insurers can pass the onus of delay on to the insured, citing incomplete documentation or claim complexity.
IRDAI, therefore, has laid down specific guidelines about clear communication channels at the time of claim. As soon as the customer makes a claim, the company should create a unique claim reference number and forward the number to the claimant through an SMS or e-mail sent to the registered mobile number and/or the email ID of the customer. After the claim is intimated, the insurer needs to keep the claimant informed about the claim status at every step of the settlement process till the claim is settled.
There might be formalities which are required to be done by the claimant in the claim settlement process such as submission of specific additional documents, and furnishing the payment details for the claim amount. Such requirements need to be notified to the claimant in a timely manner through a proper notification. Even if the claimant’s claim is accepted or rejected, the claimant should be duly informed about the status of her claim.
Insurance is one of those handful services where an individual pays a price for several years, in expectation of a possible pay-off at a later date. A lot in this relationship depends on trust. Trust in any relationship is directly related to communication; this is no different. Insurances are fraught with potential confusions and lack of knowledge. It is incumbent on insurers to make the process more comprehensible.
Come July, when these guidelines become effective, the HR executive can be better assured about less possibility of a missed communication on renewal. More importantly, when the moment of truth arrives, which is at the time of claim, she can expect insurers to communicate more and better.(The author is co-founder and principal officer at SecureNow)You can now invest in mutual funds with moneycontrol. Download moneycontrol transact app. A dedicated app to explore, research and buy mutual funds.