The process of insurance claim settlement is set to see a rejig as the insurance regulator IRDAI is proposing to enable insurers to pay the claim in instalments as against the only option of lump sum payment in both the life and health insurance.
The Exposure Draft For Settlement Of Claims In Instalments For PA And Benefit-Based Products
An exposure draft per se guidelines in relation to the settlement of claims in instalments for personal accident and benefit-based products including critical illness plans have been released by the IRDAI.
Term Insurance Payouts Already Available With An Instalment Option
For the term insurance plans, the option already exists with payout either in instalments or a lump sum amount.
A New Proposal For Claim Settlement
However, such a facility is introduced for the first time in case of general and health insurance products in the country. And as fixed-benefit plans imply payout of huge amount, the option of partial pay-outs as per the need of the customer will provide more flexibility.
So, with the proposals being finally approved, the policyholder will be able to secure a stream of payment against the insurance claim made over a pre-determined period of time.
Policyholder’s Look Out
Further in accordance with the guidelines, some of the considerations that need to be made are:
1. Depending on the product design, the claim settlement can span a maximum of 5 years time and instalments will be spread during the claim payment period.
2. Further, as per the product, the instalment of the claim payout can be a monthly or quarterly or bi-annual or annual basis.
3. Instalment claim pay-out option will be available in case of a personal accident and benefit-based health insurers and fixed benefit components of indemnity products / fixed benefit riders/add-ons attached to indemnity policies of both Individual and Group Products.
4. The option to receive claim amount can be exercised at any time during the policy tenure.
5. Also, the option of claim settlement on an instalment basis can be offered if it is over some threshold over and above the basic sum insured amount. Also, even if the process of claim payment in instalment commences, policyholder or nominee as may be the case can change the option to receive claim as lump sum amount.