Soon, Policyholders Could Opt For Health Claims In Instalments

Surabhi Soon, policyholders will have the option to receive health and accident insurance claims in instalments rather than a one-time lump sum payment.

According to the recommendations of a working group set up by the Insurance Regulatory and Development Authority of India (IRDAI), insurance companies could be asked to look into the feasibility of settling personal accident and benefit-based health insurance claims in instalments.

Long-term needs

“Allowing the payment of claim proceeds in instalments may be of great help to meet the medium- to long-term medical and needs of customers,” the working group noted in its report, adding it would also help provide a secure and regular income over a defined period of time, especially when the beneficiary is not well-versed in financial investments.

“Instalment payments are best suited where a policyholder who is the sole bread-winner of the family is struck by a grave or permanent disability,” the report said, adding that this will also help in cases of protracted or expensive medical treatments.

Such a system of payouts is already available in the life insurance sector, especially for endowment products, but is a new proposal for general and health insurance products. Countries such as Australia, Korea and Germany already have general insurance products offering instalment-based payments.

Insurers can offer the option in cases of indemnity products that have a fixed benefit component such as those for critical illnesses.

However, the committee, led by IRDAI Executive Director (Health) Suresh Mathur, has said instalment-based payouts should be allowed only for large claims, of say ₹5 lakh or more. The claims can be given in either monthly, quarterly, biannual or annual instalments, as opted by the policyholder. But the claim payment period can be capped at up to five years.

“Specifying a cap on the maximum number of claim instalments would help in ensuring uniformity across the industry,” the report noted.

The recommendations, accessed by BusinessLine, have also stressed that the settlement of personal health insurance claims in instalments shall not be the default option. Only the policyholder, and not the insurance company, can exercise the option at the time of policy purchase. But the policyholder will have the option of switching at the time of renewal or claim submission.

In case of death of the policyholder, the nominee may be allowed to choose the form of payment.

Combination option

“A combination of both the options — that is lump-sum payment and in instalments — may be offered as part of the product design,” the committee added.

The working group has also suggested that the premium rate for both the options be the same.

The IRDAI had set up the committee in October last year following proposals from some general and health insurers.