Insurance companies which do not honour claims within a specified period are now required to shell out a penalty on the due amount and pay an interest at two per cent over the prevailing bank rate.
In the policyholder protection norms for insurance companies, the Insurance Regulatory and Development Authority (Irda) has specified that life insurance companies will have to pay 2 per cent over the bank rate at the beginning of the financial year in which the claim was reviewed as penal interest if the due is not settled within 30 days of receipt of all papers and information.
Similarly, general insurance companies would be liable to pay penal interest if the claim is not settled within seven days of acceptance of offer by the insured.
Irda has also specified the claim settlement and processing norms for both life and non-life companies in the norms issued recently. The regulator had earlier circulated draft guidelines where it had proposed a penal interest of 10 per cent per annum.
The insurance regulator has also specified that in accordance with the provisions of section 47 of the Insurance Act, 1938, insurers would have to deposit the amount due to an insured in a savings bank account if the claimant or the beneficiary cannot be paid due to lack of proper identification.
Life insurers will now be required to raise all the queries regarding the claim within 15 days of receipt of a claim and settle or reject the same within 30 days.
For general insurers, Irda has stipulated that a surveyor, to assess the loss or claim, has to be appointed within 72 hours of receipt of communication of loss from an insured. The surveyors, in turn, would have to adhere to a code of conduct and have to furnish a return within 30 days of their appointment. General insurers have been permitted an additional 15 days to call for more information from a surveyor. On receipt of a request for additional information, a surveyor has to submit a report within three weeks.
The norms on policyholder protection also dwell on the proposal form which is now mandatory for all insurance companies. Irda has also specified that the proposal form and documents used in the grant of an insurance cover be made available in all languages recognised by the constitution.
Insurers have also been asked to put in place procedures and mechanism for addressing complaints and grievances of policyholders.
