IRDAI's Update On Turnaround Times For Insurance Companies

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The IRDAI has introduced a new regulatory framework that streamlines turnaround times for the various activities and services conducted by Indian Insurance Companies, replacing the previous regulatory regime.
India Insurance

Introduction

The Insurance Regulatory and Development Authority of India ("IRDAI") has introduced a new regulatory framework that streamlines turnaround times ("TATs") for the various activities and services conducted by Indian Insurance Companies, replacing the previous regulatory regime.

The TATs applicable to various activities were previously set out in the IRDAI (Protection of Policyholders' Interests) Regulations 2017 ("2017 Regulations"). However, the IRDAI has recently introduced the IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations 2024 ("PPHI Regulations"), which, inter alia, repeal the earlier provisions on TATs. As a supplement to the PPHI Regulations, the IRDAI has also issued a Master Circular on "Protection of Policyholders' Interests" on 5 September 2024 ("PPHI Circular") which provides additional guidance and specific timelines for several insurance services. This new regulatory framework brings down the TATs for Insurance Companies in India significantly, requiring faster policy issuance, claim settlement and grievance redressal.

The following is a simplified summary of the key TAT changes under the new regime:

SERVICE OLD TURNAROUND TIME NEW TURNAROUND TIME
PURCHASING A POLICY
Insurer to communicate a decision on a proposal 15 days from date of receipt of proposal1 7 days from date of receipt of proposal2. Further details/clarifications, if required, must be requested within 7 days and in one go, not piecemeal.
Insurer to provide to the Proposer a copy of the proposal submitted Within 30 days of the acceptance of a proposal3 Within 15 days of the acceptance of a proposal
MANAGING THE POLICY
Insurers to acknowledge requests made by policyholders to change their details N/A Immediately4
Insurer to complete the requested changes N/A Within 7 days of request
Freelook cancellation of policy 15 days from receipt of the policy document (for life and health policies) and 30 days for electronic life policies5 30 days from receipt of the policy document for life and health policies, whether issued electronically or otherwise6
Insurer to refund the premium after free cancellation Within 15 days of cancellation request from the policyholder7 Within 7 days of cancellation request from the policyholder8
SETTLEMENT OF LIFE INSURANCE CLAIMS
Insurer to raise any queries or requirement of additional documents Within 15 days of receipt of claim, and in one go, not piecemeal9 N/A
Insurer to pay or reject a death claim:
Without investigation Within 30 days from receipt of all relevant papers and required clarifications10 Within 15 days of intimation of claim (assuming all necessary documentation as stated in the policy is received)11
Warranting investigation Investigation completion within 90 days of claim receipt, followed by settlement within 30 days. Within 45 days of claim intimation (including investigation and settlement)
Insurer to process and settle partial withdrawal on surrender Within 15 days of receipt of request12 Within 7 days of receipt of request
Insurer to settle maturity benefits, survival benefits, annuity payouts and income benefits On or before due date13 On due date
SETTLEMENT OF HEALTH INSURANCE CLAIMS
Insurer to pay or reject a health insurance claim:
Without investigation Within 30 days from the date of receipt of the last necessary document14 Health insurance claims, other than cashless, should be settled within 15 days from the submission of the claim15
Warranting investigation Investigation to be completed within 30 days from last necessary document, and claim to be settled within 45 days from the date of last necessary document16 N/A
Cashless: Approve or deny request for pre-authorisation "Proper and prompt service to the policyholder at all times"17 Immediately, with a maximum timeframe of 1 hour from the time of request receipt18
Cashless: Granting final bill authorisation, which allows the patient's release from hospital

"Proper and prompt service to the policyholder at all times" Within 3 hours (Insurers are liable (from the shareholder's fund) for any additional charges incurred by the policyholder due to delays beyond the 3 hours)
Insurer to process the settlement request and release mortal remains from hospital on the death "Proper and prompt service to the policyholder at all times" Immediately
SETTLEMENT OF GENERAL INSURANCE CLAIMS
Appointment of surveyor (retail insurance) Within 72 hours of the receipt of intimation from the Insured19 Within 24 hours of reporting a claim20
Surveyor to commence the survey Within 48 hours of appointment21 N/A
Surveyor to forward an interim report of loss to the Insurer No later than 15 days from the date of the surveyor's first visit N/A
Surveyor to submit the final report to the Insurer Within 30 days of appointment, or 90 days in the case of claims relating to commercial and large risks22 Within 15 days of appointment
Insurer to pay or reject a general insurance claim Within 30 days of receipt of the final survey report

Within 7 days of receipt of the survey report

Where surveyor not appointed (small value claims 23 or claims exempt in furtherance of Section 64UM(10) of the Insurance Act, 193824), the position is not clear and claims likely need to be settled per the Board approved policy25

RESOLVING DISPUTES
Insurer to acknowledge a complaint "Efficiently and with speed"26 Immediately27
Insurer to seek and obtain further details from the complainant "Efficiently and with speed" Within 7 days of complaint28
Insurer to resolve the complaint and issue final letter of resolution "Efficiently and with speed" Within 14 days, along with the reasons for not accepting the complaint
Insure to close grievance on non-receipt of reply Within 56 days of the complaint Within 56 days of the complaint
Insurer to ensure awards by the Insurance Ombudsman favouring policyholders / claimants to be settled Within 15 days of receipt of acceptance letter (which is sent to the Insurer by the complainant within 1 month from the date of receipt of the award)29 Within 30 days from the date of receiving the award (failure to do so is subject to a penalty of Rs. 5,000 per day of delay, payable to the complainant, in addition to any penal interest levied under the Insurance Ombudsman Rules 2017)30
Insurer to appeal the Ombudsman's award N/A Within 30 days of receiving the award
Corporate agents and insurance brokers to acknowledge complaint from the complainant Within 14 days31 Within 14 days (no change)
SWITCHING HEALTH INSURANCE PROVIDER
Policyholder to apply to new Insurer to switch the entire policy At least 45 days before, but not earlier than 60 days from the premium renewal date of the existing policy (Insurers are free to consider proposals received within such 45 days also)32 At least 30 days before, but not earlier than 60 days from the renewal date (Insurers are free to consider proposals received within 15 days of the renewal date also, provided they ensure no break in policy)33
Previous Insurer to provide policyholder information to the new Insurer Within 7 working days of the receipt of the request Immediately, but not more than 72 hours of receipt of request through the Insurance Information Bureau of India (IIB)
New Insurer to decide and communicate on proposal Within 15 days of receipt of information (beyond this time frame, the Insurer loses the right to reject and shall accept the proposal) Not more than 5 days of receipt of information

Concluding Remarks

The implementation of the PPHI Regulations and the accompanying PPHI Circular marks a significant change with respect to TATs applicable to the various services and activities performed by Indian Insurance Companies. The new framework has shortened the timelines for multiple procedures, including accepting proposals, issuing policies and settling claims34.

However, intermediaries such as corporate agents and insurance brokers retain their original timelines for redressing customer grievances and it will be interesting to see how their TATs interact with those imposed on Insurers.

While the updated regulatory framework offers significant benefits to policyholders, Insurance Companies will need to carefully review these new provisions and review their current practices to comply. Insurance Companies will now need to further optimize their operations, leverage new technology, and improve internal processes to meet the stipulated TATs. This would be required to avoid the specific penalties, which apply in the form of penal interest on claim amounts as well as daily fines for ombudsman amounts. This is in addition to any regulatory actions that complaints of such delays may invite.

Footnotes

1. R8(6) of the 2017 Regulations.

2. Pages 10, 25 and 41 (Processing of the proposal forms) of the PPHI Circular.

3. R8(1) of the 2017 Regulations.

4. Pages 14, 28 and 44 (Service request) of the PPHI Circular.

5. R10(1)(i) of the 2017 Regulations and R14(i)(1) of the IRDAI (Health Insurance) Regulations 2016.

6. R20(1) of the PPHI Regulations.

7. R10(1)(iii) of the 2017 Regulations.

8. R20(6) of the PPHI Regulations.

9. R14(1) of the 2017 Regulations.

10. R14(2)(i) of the 2017 Regulations.

11. Page 15 (Processing of claim and TAT for settlement of claims) of the PPHI Circular.

12. R14(2)(v) of the 2017 Regulations.

13. R14(2)(iv) of the 2017 Regulations.

14. R27(i) of the IRDAI (Health Insurance) Regulations 2016.

15. Page 31 (Settlement of health insurance claims) of the PPHI Circular.

16. R16(2) of the 2017 Regulations.

17. R21(2) of the IRDAI (Third Party Administrators – Health Services) Regulations 2016.

18. Pages 30 and 31 (Cashless facility for health insurance) of the PPHI Circular.

19. R15(1) of the 2017 Regulations.

20. Pages 45 and 46 (Settlement of claims under retail general insurance policies) of the PPHI Circular.

21. R15(3) of the 2017 Regulations.

22. R15(5) of the 2017 Regulations.

23. Page 45 (Settlement of Claims under Retail General Insurance Policies) is in the following terms:

"1. In case of a claim under general insurance policy, loss assessment is made by the surveyor. Any loss that is reported under a general insurance product that exceeds Rs.50,000/- or more (in case of motor insurance) and Rs.1 lakh or more (in case of other than motor insurance) needs to be mandatorily surveyed by a registered surveyor and loss assessor."

24. Classes of claims exempt from appointing a surveyor can be found in IRDAI Order Re: Exemption of classes of claims under sub-section (10) of Section 64UM of the Insurance Act, 1938.

25. R22(1)(b) of the PPHI Regulations.

26. Annexure I of the 2017 Regulations.

27. Pages 19, 33 and 47 (Turnaround time for resolution of complaints / grievance) of the PPHI Circular.

28. Page 54 of the Master Circular on Operations and Allied Matters of Insurers 2024.

29. Rule 16(6) of the Redressal of Public Grievances Rules 1998.

30. Pages 19, 34 and 48 (Implementation of Ombudsman Award) of the PPHI Circular.

31. Schedule III, 4(p) of the IRDAI (Registration of Corporate Agents) Regulations 2015 and Schedule I, Form H, 8(c) of the IRDAI (Insurance Brokers) Regulations 2018.

32. Schedule I of the IRDAI (Health Insurance) Regulations 2016.

33. Page 36 (Portability in case of Health Indemnity Policies) of the PPHI Circular.

34. If a claim is not settled within the specified timelines, the claimant is entitled to interest at the prevailing bank rate plus an additional 2%, calculated from the date of intimation until the date of payment. The Insurer must pay this interest suo moto (on their own initiative) along with the claim amount.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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