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IRDAI proposes to standardise, simplify policy wordings of health indemnity insurance policies

The objective of the guidelines on 'Standardization of General Clauses in Health Insurance Policy Contracts' is to standardise the common general clauses incorporated in indemnity based health insurance policies.

, ET Online|
Jan 14, 2020, 10.22 AM IST
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All insurers have to comply with the common policy wordings drafted by the regulator.
Health insurance policies could soon become easier to understand. The insurance regulator has proposed to standardise and simplify policy wordings of standard health indemnity plans. By doing this, the Insurance Regulatory and Development Authority of India (IRDAI) wants to bring in uniformity and transparency in policy contracts.

According to IRDAI's draft proposal, released on January 10, "The objective of the guidelines on 'Standardization of General Clauses in Health Insurance Policy Contracts' is to standardise the common general clauses incorporated in indemnity based Health Insurance (excluding Personal Accident (hereinafter called as PA) and Domestic /Overseas Travel) products covering Hospitalization, Domiciliary hospitalization and Day care treatment in order to simplify the wordings of general clauses in the policy contracts and ensure uniformity and greater transparency."

As per the draft proposal (exposure draft), "These guidelines are applicable to all general and health insurers offering indemnity-based health insurance (both Individual and Group) covering hospitalisation, domiciliary hospitalization and daycare treatment."

The draft proposes to make the guidelines on 'Standardization of General Clauses in Health Insurance Policy Contracts' applicable to all individual and group health insurance policies.

In cases where the premium payment is made in instalments (half-yearly, quarterly or monthly, as mentioned in the policy schedule/certificate of insurance) by the policyholder, the regulator has asked insurers to give their opinion on how many days grace period should be given to such policyholders as per the health insurance product offering.
As per the draft proposal, "Grace period of (Insurer to fill as per product design) days would be given to Pay the instalment premium due for the Policy."

The regulator has asked insurer to go through the existing policy wording and give opinion wherever it is required. As per the draft proposal insurers have to include/comply with policy wordings for some of the key points mentioned below:

1. Disclosure of Information
The policy shall be void and all premium paid thereon shall be forfeited to the Company in the event of misrepresentation, misdescription or non-disclosure of any material fact.

(Note: "Material facts" for the purpose of this policy shall mean all important, essential and relevant information sought by the company in the proposal form and other connected documents to enable the insurer to take informed decision in the context of underwriting the risk)

2. Claim Settlement (provision for Penal Interest)
The insurer has to settle or reject a claim, as the case may be, within 30 days from the date of receipt of last necessary document. In the case of delay in the payment of a claim, the insurer will be liable to pay interest from the date of receipt of last necessary document to the date of payment of claim at a rate 2% above the bank rate.

3. Renewal of Policy
The Policy shall ordinarily be renewable except on grounds of fraud, moral hazard, or misrepresentation by the insured person. Renewal shall not be denied on the ground that the insured had made a claim or claims in the preceding policy years. Also, at the end of the policy period, the policy shall terminate and can be renewed within the grace period to maintain continuity of benefits without break in policy. Coverage is not available during the grace period.

Also read: IRDAI makes it easier for you to port your health insurance policy to a different insurer

4. Nomination
The policyholder is required at the inception of the policy to make a nomination for the purpose of payment of claims under the policy in the event of the death of the policyholder.

Also read: How to make a claim on multiple health insurance policies

5. Complete discharge
Any payment to the insured person or his/ her nominees or his/ her legal representative or to the hospital/nursing home or assignee, as the case may be, for any benefit under the policy shall in all cases be a full, valid and an effectual discharge towards payment of claim by the company to the extent of that amount for the particular claim.

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