IRDAI changed Motor Insurance Rule; No denial of Arbitrary Claims and quicker Claim Settlement
The Insurance Regulatory and Development Authority of India (IRDAI) issued the master circular for general insurance business on June 11, 2024, in an effort to help thousands of motor insurance customers.
The regulator has revised and clarified some of the most vital provisions that will impact all auto insurance policyholders which include a specific timeline for settling motor insurance claims, grounds for mandatory pay as you drive, and revisions to the cancellation policy.
No Motor Insurance Claim can be denied due to ‘Want of Documents’
No Motor insurance claim can be denied in case of inaccessibility of the documents, the regulator said. IRDAI said in a circular, “No claim will be rejected due to a lack of documentation. All necessary documents must be presented at the time of underwriting the proposal.”
If it’s needed, the insurer will ask for directly related additional documents for claim settlement such as claim form, permit, driving license etc.
Insurers to settle Claims within 7 days of Survey Reports
IRDAI has described a detailed process and timetable for settling a vehicle insurance claim, to make things easier for auto insurance policyholders. The following are given below:
1. When a policyholder files a claim, it is the duty of the insurer must notify him about the time period required to settle the claim. As per the regulator’s instructions, insurers have to mention the time period of claim settlement on the IRDAI website and in the customer information sheet (CIS).
2. Surveyors must be assigned within 24 hours through the General Insurance Council tech-based solution after the claim is reported.
3. Survey report should be submitted to the insurer within 15 days of allocation by the surveyor. The insurer is bound with the duty to obtain the survey within the time limit given.
4. Within 7 days of receipt of the survey report, the insurer needs to decide on the claim.
5. If a claim settlement is delayed beyond the above-mentioned stipulated timelines, it will be considered a violation of regulations/ legislation. A penalty can be imposed on the insurer for such delays.
6. The insurer cannot reject the claim in full or in part if: i) the violation of warranty or condition is unrelated to the type or circumstances of the loss. ii) For any delay on the part of the policyholder that does not result in an increase in the amount of evaluated loss.
Pay as you drive option should be one of the first choices when buying Insurance policies
While buying a motor insurance policy, IRDAI asked the insurers to present 2 options – i) Pay-as-you-drive insurance cover and ii) A comprehensive policy that offers coverage for depreciation.
Priorly, the pay-as-you-drive was kept as an option and not mandatory for motor insurance customers.
The insurance policy of pay as you drive is extensive own damage (OD) plus third party (TP) policy. This policy includes a third-party premium which determines as per to the norms comprehensive own damage premium calculated based on the number of kilometers you intend to drive in a particular period of time.
The pay-as-you-drive policy worked on a simple mechanism that you should pay less insurance premiums if you drive less. If the consumer is fully sure about the less usage of a vehicle during a year then he can pay the insurance premium as per the actual usage instead of a flat rate.
Pay-as-you-drive policy has two basic types:
- One is based on how many kilometres the vehicle is driven.
- Second is the number of days the insurance policy is active.
Cancellation of Motor Insurance Rule Changed
The Insurance regulator has changed the rule for cancellation of Motor insurance policy as well. As per the master circular, the insurer only has the authority to cancel the policy on the basis of well-defined fraud and only cancel it after giving a minimum notice of 7 days to the retail policyholder.
Earlier, retail policy can be cancelled on the grounds based on misrepresentation, non-disclosure of material facts, fraud or non-cooperation by the insured, according to the IRDAI document. A new circular of IRDAI changed this rule and the condition kept it to only established frauds.
Except in the case of double insurance or total loss, the insurer cannot cancel the obligatory Motor Third Party Liability insurance or any other insurance that is compulsory.
IDV should be mentioned on Insurance Websites and CIS
Insurers should create a committee called “Product Management Committee (PMC)”, that will suggest and approve the criteria to determine the IDV of the vehicle and any related scale of value depreciation.
The insured declared value (IDV) of the vehicle is usually fixed at the beginning period of each policy.
Most importantly, the insurer has to mention the procedure of how they decide the vehicle IDV on their website and the same IDV details should be mentioned in the CIS as well.
CIS Mandatory for Motor Insurance Policies
It is needed to aware the consumers about their insurance product and its terms and conditions. And, for this, the insurer can ask the general insurer to provide a customer information sheet (CIS) for vehicle insurance and other insurance policies that is general in an upgraded format. The basic features of policies will be explained by CIS.
The regulator said that CIS includes features like scope of coverage, any add-ons, basic insured sum, deductibles, exclusions, warranties and special conditions, endorsements etc. as well.
The customer information sheet (CIS) will also include the procedure of the claim, intimation of the claim and its processing, sample claim calculation process for retail products and grievance redressal mechanism with the details of contact of the insurance ombudsman of appropriate jurisdiction.
CIS can also provided in the local language if the policyholders want. Acknowledgement of CIS must be obtained by the insurer in either physical or digital format from the auto insurance policyholder.
