The Insurance Regulatory and Development Authority’s (IRDA) Annual Report for 2014-15, states that R701.69 crore life insurance claims were repudiated by insurers. The report further highlights that “during the year, insurers have repudiated 8% of the number of claims handled … claims repudiation was high for benefit-based policies at 22%.” This is a disturbing trend as 22% repudiation of claims is unacceptably high for such simple
In a developing economy like India, where one has flagship schemes of the Modi government focussing on crop, life and health insurance for the downtrodden on the one hand and “Make in India” on the other, it is vital to have an insurance regulator absolutely committed to policy holders’ rights.
Had there been a parliamentary oversight in insurance matters, our MPs would have found the amount of claims repudiated unacceptably high in products like life insurance. Even, IRDA in its report does not mention the steps being taken to reduce the repudiation ratio. This is startling, since they are tasked primarily to protect the interest of policyholders.
Individual health insurance: General insurers aggressively sell travel health policies. If the intention is to cover emergency medical expenses incurred by Indian citizens travelling abroad on a holiday or business, the IRDA has defeated this objective by allowing insurers to exclude pre-existing diseases. Imagine the plight of an Indian resident travelling abroad on a holiday, requiring emergency hospitalisation because of a heart attack, being denied the claim because he had a history of heart disease. The medical costs abroad would bankrupt most middle class citizens.
Ideally, a travel health policy should reimburse expenses incurred for emergency medical treatment to stabilise the condition of the policy holder so that he is fit to return home for further treatment. Instead of underwriting risks, insurers use travel agents and travel portals to push sales to healthy people, but deny coverage (even after selling the policy) as they tend to exclude anyone who has a history of heart ailment or diabetes or any other pre-existing condition. This again needs Parliament’s immediate attention.
Corporate commercial lines of insurance: Coming now to the commercial general insurance (covering fire, marine, engineering and miscellaneous classes of business), IRDA does not report the statistics of claims repudiated in fire, engineering, marine or miscellaneous insurances with a detailed analysis
The raison d’être of the insurance industry is to make good insured economic losses. It then becomes imperative that IRDA reports facts relating to claims reported, paid, outstanding and repudiated in greater detail.
Repudiation of claims is a serious issue. While individuals can approach the ombudsman’s office for Redressal of grievances, the IRDA has failed to ensure a viable mechanism for commercial entities. There is no mechanism for speedy resolution of disputes, such as Alternate Dispute Redressal. Mechanisms, such as mediation and arbitration, should form part of the policy conditions. With courts clogged with pending cases, ADR is the way forward. We need a regulator who is more forward looking than is presently the case.
IRDA, in its annual report, categorically states that they do not interfere in claims disputes. While that is so, the IRDA should recognise that they must institutionalise a mechanism for speedy dispute resolution. The system should be such that a policy holder should not be required to borrow money from a bank to restart his business. The insurers must meet their liability as quickly and definitely within a fixed time.
IRDA had a ‘File & Use’ system, now modified to ‘Use and File’, whereby each insurance company has to file the full policy wordings to the regulator for approval. However, does IRDA have a mechanism to see whether products approved by them for marketing, respond to genuine claims of the insured? The answer is in the negative—again a pointer towards a very passive regulator. Whereas contract certainty is an article of faith for insurance regulators the world over, in India the regulators think their role is over once the guidelines are issued.
Some of the regulations are baffling to say the least. For instance, those concerning the surveyors. Contrary to international best practice, the IRDA requires surveyors in marine insurance claims (an important class of general insurance) to not only comment on the proximate cause of the loss and the extent of the claim, but also interpret policy terms and conditions. This has virtually killed the remarkable expertise the four PSU insurance companies had in the past. With the exception of a diligent few, most officers now conveniently pay or reject claims on the basis of the surveyors’ comments thereby minimising for themselves any adverse audit reports. Honest officers who take decisions suffer. Those who do not take any decisions over-ruling surveyors avoid an audit or vigilance enquiries against themselves, thereby enhancing their chances of promotion!
The time taken to enforce contracts in court, unfortunately, creates a situation where very few policyholders resort to litigation. Therefore, survey reports do not face the critical scrutiny that they deserve from the courts. Interestingly, IRDA has not taken action, even where the courts pointedly commented on surveyors’ failure to maintain impartiality.
IRDA does not keep track of decisions of the High Courts, Supreme Court and the National Commission. Unless IRDA institutionalises such a mechanism, they will fail to take corrective measures, including forcing insurers to change policy wordings to keep pace with judicial pronouncements. This oversight must also include adverse observations of courts on the conduct of surveyors.
There is a need for the IRDA annual reports to focus on data collected from insurers and surveyors to objectively gauge the efficacy of regulations, particularly in the area of policyholder protection. This will ensure a greater focus on policyholder protection. Till then there is a very strong case for greater parliamentary oversight