Irdai directs Go Digit to withdraw product offering life insurance benefits

Insurance sector regulator Irdai has asked Go Digit General Insurance (Go Digit) to discontinue a product offering life insurance benefits in violation of regulatory norms.

The Insurance Regulatory and Development Authority of India (Irdai) also asked the insurer to wthdraw advertisements regarding the product from all media.

Irdai said a show cause notice (SCN) was issued in August 2021 as deficiencies were observed in complying with the provisions of Insurance Act.

After personal hearing chaired by Irdai member (non-life) T L Alamelu in October with the company executives, the regulator said no insurer shall carry on any class of insurance business in India unless it has obtained a certificate of registration for a particular class of insurance business.

The matter relates to modification in the Digit Group Total Protect Policy by the insurer in July this year, under which one additional section by name of 'Major Illness Plus Cover' was incorporated in the policy.

The regulator said upon examination of the modified version of the product, it was found that it offered two benefits in the event of triggering of the covered contingent event. One of the benefits relates to payment of sum insured on diagnosis and/or surgical procedure of major illness.

Another relates to payment of an additional benefit amount in case the policyholder does not survive till the end of the policy period owing to the same major illness and/or surgical procedure for which the claim was admitted.

The product offers insurance coverage to 82 major illnesses.

Irdai said providing additional benefit amount to the nominees/legal heir of the policyholder in case of non-survival falls within the definition of life insurance business.

Go Digit was asked to immediately withdraw the said clause under the policy in August and was also asked to send the action taken report to the Authority.

Following further hearing on the matter and personal hearing Go Digit contended that the benefit offered under the proposed clause does not fall under life insurance business but under miscellaneous insurance business defined under Insurance Act, 1938.

The insurer had also requested the Authority to withdraw the communication and SCN issued in the matter.

The Authority in its decision, however, said the request of the insurer was not acceptable and said providing the death benefit cover or the assurance of payment of money on death of the policyholder itself falls within the definition of life insurance business, though limited to the major illnesses named in the policy.

The insurer's claim that the additional benefit offered in the product squarely falls within the ambit of health insurance business and it is permitted to carry on this business is not found tenable, Irdai said, adding "it is observed that there is no merit to consider in the submissions of the insurer".

"Notwithstanding the direction issued to the insurer for discontinuance of the product Digit Group Total Protect Policy, the Authority reserves the right to take further action for violation of the Act provisions. The insurer is directed to place this order in the immediate board meeting and send the certified copy of minutes to Authority," as per the Irdai order.