The ongoing Covid-19 pandemic will undoubtedly have some significant short term and long term implications on the Indian insurance industry, given that it not only affects individuals, but also businesses and economies world over on an unprecedented scale. All in all, the pandemic is challenging the sector to quickly devise new products to cater to the protection needs of the insured in various sectors. As India enters its second phase of mandatory nationwide lockdown, the IRDAI and Indian insurance companies (among other financial services) have been permitted to function, subject to exercise of requisite social distancing and precautionary measures.
The situation has undoubtedly caused hardship to policyholders in making premium payments and ensuring continuity of insurance covers, when they need it the most in these uncertain times. Further, traditional insurance distribution channels involving in-person solicitation process have been impacted. In the long run, social distancing will definitely give a push to online and distance marketing insurance sales channels.
The IRDAI is proactively reviewing the situation and has announced various measures to facilitate the sector in serving the policyholders. In this context, some of the key changes brought in by the IRDAI in the applicable regulatory framework are set out below:
Insurers have been directed to design products covering treatment costs for Covid-19 cases, to meet health insurance requirements of various sections of the population. Insurers have certainly followed suit and a number of Covid-19 specific health insurance products on both, an individual and a group level (covering staff of large organizations) are now available in the market. Such kinds of products will be particularly useful for addressing risks associated with corporate travel, when the pandemic subsides.
In respect of partial or full closure of offices, the IRDAI has directed life insurers to notify policyholders by SMS/ e-mail and/ or press releases in addition to display on the branch office. Life insurers were further directed to display on their website a list of offices not functioning, alternate arrangements for policyholder servicing, contact phone numbers, if any, for emergency needs, information on Covid-19 death claims (including their admissibility), specific information (product wise) on admissibility of claims under health insurance contracts. The IRDAI also allowed an additional grace period of one month for all life insurance premium payments due in March, 2020.
For better monitoring of the Covid-19 situation, the IRDAI further directed insurers to report details of offices fully/ partially closed with duration and steps taken in this regard, every fortnight. Insurers have also been asked to maintain data on Covid-19 claims, separately, which is to be submitted to IRDAI as and when called for.
Insurers are further required to prominently display on their website a dedicated help line number for policyholders and another help line number for other stakeholders including agents and intermediaries. Further, insurers are to devise a business continuity plan which, inter alia, deals with processes, transactions, reporting and customer services to be handled in a seamless manner in light of the present situation, with a copy of this plan to be submitted to the IRDAI.
All insurers have been also called upon to set up a crisis management committee, comprising of key personnel to monitor the current situation on a real-time basis and to take timely decisions on staff matters, risk mitigation and minimization of businesses disruption. The risk management committees of insurers have been entrusted with the task of evaluating various risks (such as strategic, operational, insurance, liquidity, credit, reputational, market, foreign exchange, reduction in new business, reduction in renewal business, asset liability mismatch, reduction in yield, capital erosion and claims) and devise necessary mitigation measures. Significant impact on operations or capital requirements or solvency margin of insurers are to be promptly communicated to the IRDAI.
The IRDAI has further mandated that:
wherever policyholders’ email addresses are available, policy documents may be issued through email within the prescribed period. SMS may also be used to confirm to the policyholders about issuance of policy documents.
insurers are encouraged to capture email and phone numbers of prospective customers for intimation of commencement of cover and for further policy servicing.
an additional 30 days is allowed for insurers to dispatch documents for policies issued between March 15, 2020 and April 30, 2020.
an additional 21 days is allowed as response time for policyholder complaint redressal for all non-Covid 19 related complaints received between March 15, 2020 and April 30, 2020.
The IRDAI, in its circular of April 3, 2020, went on to clarify that insurers must cover the risk in cases where renewal premiums are due but could not be paid, as per the MOF’s notifications.
In view of the extension of the nationwide lockdown till May 3, 2020, on April 15, 2020, the MOF amended its notifications to cover policies falling due for renewal during March 25, 2020 to May 3, 2020 and permitted premium payment till May 15, 2020 for both health insurance and third party motor insurance policies. The IRDAI in its circular of April 16, 2020 confirmed that its clarifications and instructions of April 3, 2020 would continue to apply in the context of the extended timelines.
The board of directors of insurers critically examine their capital availability and solvency margin as required in the current financial year 2020-21 and devise strategies to ensure that they have adequate capital and resources available with them; and
Insurers align the dividend pay-out for the financial year 2019-20 as well as rationalize expenses of management for financial year 2020-21 so as to be aligned with the above strategy. By its circular of April 24, 2020, the IRDAI went one step further and urged insurers to refrain from dividend pay-outs from profits pertaining to the financial year ending March 31, 2020, till further instructions, in view of the emerging market conditions. This position will be reassessed by the IRDAI based on financial results of insurers for the quarter ending September 30, 2020.
decisions on authorization for all cashless treatment are communicated to the network provider hospital within 2 hours of receiving the authorization request and last necessary requirement from the hospital, either by the insurer or the third party administrator (“TPA“), whichever is earlier.
decisions on final discharge should be communicated to the network provider hospital within 2 hours of receipt of final bill and last necessary requirement from the hospital, either by the insurer or the TPA, whichever is earlier.
As life is certainly not in the ordinary course for policyholders, insurers, insurance intermediaries and other stakeholders, it is expected that the IRDAI will continue assessing the impact of Covid-19 crisis very carefully and proactively take measures to steer the ship.
Contributed by: Shailaja Lall, Ashish Teni, Partner; Uday Opal, Senior Associate
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
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