Customers may soon be able to choose the mode of payment for personal accident and certain benefit based health insurance policies. (Photographer: Akio Kon/Bloomberg)

IRDAI Suggests Staggered Payment Of Accident, Health Claims

India’s insurance regulator suggested that personal accident and certain benefit-based health insurance claims can be paid in instalments in at most five years to help cover recurring expenses.

While the option for lump-sum payment will stay, allowing deferred payments could help customers meet their medium- to long-term medical and their family’s financial needs, a working group formed by the Insurance Regulatory and Development Authority of India said in a report. The regulator will release norms after getting feedback from the industry.

Policyholder can choose between monthly, quarterly, half-yearly or annual payments, IRDAI recommended. If the policyholder dies during the payment period, the nominee will be given the option to choose the mode of payment. And policyholders be allowed to switch between the deferred and lump-sum payment modes any number of times during the policy period.

“Personal accident insurance is very much akin to life insurance in which the claim is made to cover livelihood expenses or for prolonged income substitution,” Joydeep Roy, insurance leader at PwC India, said. “Since the option of deferred claim payment was already available for life insurance products, it is only logical that this gets extended to personal accident covers.”

Once rules are announced, insurers will need to give both payment options to customers at the same premium rate. The claim amount will be higher if paid in instalments compared with a one-time payment “as the benefit is delayed in case of the deferred option, and additional benefit must flow in such a case to the policyholder”, the report said. The instalments will not be linked to interest rates and a fixed payout structure must be explained upfront to policyholders.

The choice may be available for policies with a higher sum insured, the report said without suggesting the threshold.

An actuary with a general insurer, however, told BloombergQuint that the sum insured should at least be Rs 10 lakh or above for including the deferred payment option. For a lower amount, the cost of amortising claims becomes too high for insurers, the actuary said on the condition of anonymity as it’s a regulatory matter.

The choice of staggered payment, the IRDAI report said, could be a source of regular income to customers requiring expensive medical treatments for chronic or terminal conditions like diabetes, heart diseases and cancer, or for families of those struck with permanent disability. It could also be useful to customers with limited knowledge of investments or no fixed source of income.