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Insurers to pay 10 per cent penalty for late claim settlement

Sidhartha

The Insurance Regulatory and Development Authority has proposed that insurers should pay a penalty for late payment of claims.

According to the draft guidelines on "Protection of Policyholders' Interests" prepared by IRDA, general insurers would have to shell out 10 per cent simple interest if a claim is not cleared within 7 days of submission of surveyor's report.

In the case of life insurance companies, 10 per cent simple interest is to be paid if claims are not cleared within 30 days of submission of requisite documents and claim papers. At present, there is no penalty on late claim settlements.

Though the draft guidelines are silent on the proposed policyholder protection fund, top sources said that the issue has been discussed with insurance companies but a consensus is yet to be reached. They, however, did not rule out the possibility of a fund being announced in the final guidelines.

Sources said that some insurers have opposed the protection fund saying that a financially sound company should not be made to pay for the fault of others.

Some insurers were of the opinion that the fund should be controlled by the two insurance councils and not by IRDA. "The council has not come back to us on the issue of funding the corpus of the policyholder protection fund," said a source.

IRDA had proposed that a policyholder protection fund be set up through a levy on insurance companies which will be used in case an insurance company is unable to meet its payment obligations.

The draft guidelines, comments on which will be received over the next fortnight, are also silent on the role of Ombudsmen. Sources said that some modifications as to their scope of work have to be made.

"Some Ombudsmen are also entertaining commercial claims instead of looking purely at personal ones. Clarifications as to their scope of work also need to be worked out," said a source.

IRDA has also proposed that Ombudsmen should receive complaints from across the country instead of the present practice wherein grievances can only be filed with the Ombudsman who has jurisdiction over the place where the policy is purchased.

According to the draft guidelines, the proposal for buying an insurance cover has to be printed in a regional language too. The norm also stipulates that the proposer has to fill in the form and an agent or a company official should stay away from filling in forms at the time of purchasing an insurance policy.

The draft guidelines have also proposed that every insurance company should nominate a grievances redressal officer not associated with underwriting the company's covers.

Moreover, the board should look into the claim redressal process at least once every quarter.

It has also been proposed that every life insurance and personal accident insurance policy should have a nomination facility, which a proposer should fill in at the time of purchasing a cover.

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