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26 January 2021
Standardised health insurance
Proposed insurance products and working groups
Motor insurance products
Policy issuance and related compliance
Maintenance of data
Miscellaneous operational norms
Changing landscape of health insurance business
With the widespread impact of the COVID-19 pandemic and several regulatory changes having been introduced (as well as proposed) by the Insurance Regulatory and Development Authority of India (IRDAI), 2020 was a busy year for the Indian insurance sector. The year saw:
This article provides an overview of some of the key developments of 2020.
At the beginning of 2020, the IRDAI issued norms on the standard covers, sum insured and policy wordings for a standard individual health insurance product (the so-called 'Arogya Sanjeevani policy'), which general and health insurers must now offer.(1) Thereafter, with the worsening of the initial COVID-19 outbreak, the IRDAI advised insurers to design appropriate health insurance products to cover risks caused by COVID-19. While there have been many other developments in the health insurance space (discussed separately below), the IRDAI issued the following guidance in relation to health insurance products:
The IRDAI issued the Guidelines on Standard Individual Term Life Insurance Product (Saral Jeevan Bima) of 15 October 2020, pursuant to which the IRDAI issued norms on the non-linked, non-participating, individual, pure-risk life insurance product which all life insurers must offer from 1 January 2021 (for further details please see "Standard life insurance products: new regulatory requirements").
In addition to introducing standard products in the insurance market, the IRDAI issued exposure drafts and invited stakeholder comments on standardised versions of products – namely, the personal accident product,(6) the standard vector-borne diseases health policy(7) and the standard travel insurance product.(8) It remains to be seen whether the proposed standard products will be notified in their present form.
The IRDAI also constituted working groups in respect of:
The recommendations and comments of these working groups are expected in 2021; it will be interesting to see the form in which these insurance products are ultimately notified.
The regulatory regime applicable to motor insurance business saw various developments in 2020 (for further details please see "Motor insurance: recent regulatory changes"). Most notably, the withdrawal of the long-term motor package cover offered for three years (for new cars) or five years (for new two-wheelers), with effect from 1 August 2020,(13) owing to implementation concerns. Further, in light of the Supreme Court's decision in MC Mehta v Union of India,(14) the IRDAI expressly clarified that not holding a valid pollution under control (PUC) certificate is not a valid reason for denying any claim under a motor insurance policy.(15)
In relation to reinsurance arrangements by Indian insurers, the IRDAI issued the Guidelines on Filing of Reinsurance Arrangements with the IRDAI of 31 January 2020, which prescribed conditions for the submission of Indian insurers' annual reinsurance programmes and clarified the accounting treatment applicable to all 'alternative risk transfer' agreements.(16) The IRDAI also issued the Circular on Capital Gearing Treaties of 30 March 2020, pursuant to which insurers were:
The IRDAI exempted insurers from issuing physical copies of policy documents and proposal forms for the financial year 2020 to 2021(17) and allowed life insurers to obtain customer consent without requiring wet signatures on proposal forms.(18) In this context, the IRDAI also issued norms on video-based identification processes as an optional electronic and consent-based identification or know-your-customer process.(19)
The IRDAI has issued various instructions in light of and to reduce the impact of the COVID-19 pandemic on policyholders and insurers (for further details please see "COVID-19: regulatory updates"), including with regard to:
On 20 October 2020 the IRDAI issued the Exposure Draft on Insurance Regulatory and Development Authority of India (Insurance Advertisements and Disclosure) Regulations 2020, which proposes to, among other things, bring the existing IRDAI (Insurance Advertisements and Disclosure) Regulations 2000 into conformity with the Master Circular on Insurance Advertisements, as updated on 31 August 2019.
Based on various representations from the Life Insurance Council and the General Insurance Council, in August 2020 the IRDAI permitted insurers to classify investments in preference shares and equity shares as approved investments between 1 April 2020 and 31 March 2021.(34) Further, insurers were also directed to undertake at least 10% of their total secondary market trades in the corporate bonds through the request for quote (RFQ) platform available on the BSE and the National Stock Exchange.(35) The IRDAI also directed insurance intermediaries to submit an undertaking(36) confirming compliance with the norms on investment from countries which share a land border with India,(37) which now requires prior government approval (for further details please see "FDI in insurance intermediaries – update").
On 5 November 2020 the IRDAI also proposed the introduction of the IRDAI (Manner of Determination of Compensation to Shareholders on Merger of an Insurer under a Scheme Prepared under Section 37A) Regulations 2020, which concern the determination of compensation for shareholders and members whose rights have been adversely affected.
In relation to the submission of data for regulatory inspections, on 26 November 2020 the IRDAI issued the IRDAI (Minimum Information Required for Investigation and Inspection) Regulations 2020, which will enter into force on 23 May 2021 (for further details please see "Minimum information for investigation and inspection by IRDAI"). The regulations stipulate the minimum information and records to be maintained by insurers, intermediaries and insurance intermediaries and steps to be taken towards the digitisation of all physical records,(38) in order to enable the IRDAI's investigating officers to effectively undertake their duties and functions. Further, these entities were directed to maintain and update a board-approved policy in relation to the maintenance of records and information.
The IRDAI also issued guidance on various operational matters concerning insurers:
Standardisation in health insurance
In early June 2020, based on comments from stakeholders on the exposure draft of the Guidelines on Standardisation of General Clauses in Health Insurance Policy Contracts of January 2020, the IRDAI notified the final guidelines(44) stipulating standardised general clauses for indemnity-based health insurance policies (excluding personal accident and domestic and overseas travel matters), such as the disclosure to information norm, the claim settlement, cancellation and the renewal of a policy. Further, the Guidelines on Standardisation in Health Insurance of 29 July 2016 were superseded by the Master Circular on Standardisation of Health Insurance Products of 22 July 2020, which compiles all standardisation norms issued up to 31 March 2020.(45)
Product construct norms
In June 2020 the IRDAI issued various norms expanding and clarifying the construct and scope of coverage under health insurance policies, such as in relation to insurance coverage for persons with:
In August 2020 the scope of the definition of 'pre-existing disease' set out under the standardisation guidelines was amended.(49) More recently, the IRDAI required insurers to include a benefit illustration in respect of every health insurance product offering individual and family floater options.(50)
Health insurance amendment regulations
The IRDAI (Health Insurance) (Amendment) Regulations 2019 introduced certain amendments to the existing IRDAI (Health Insurance) Regulations 2016, including:
Wellness benefits in health insurance
Pursuant to comments from stakeholders on the draft guidelines (for further details please see "Wellness benefits in health insurance: proposed guidelines"), the IRDAI issued the Guidelines on Wellness and Preventive Features of 4 September 2020, which focused on insurers' provision of wellness and preventive features and benefits. The wellness guidelines continue to encourage and reward policyholders which meet the health and lifestyle conditions and criteria set out under their health insurance policy.
Migration and portability
The IRDAI issued the Guidelines on Migration and Portability of Health Insurance Policies of 2 January 2020, which stipulate that insurers offering indemnity-based health insurance policies must provide for the portability and migration of policies in accordance with the norms stipulated thereunder. In addition to these norms, the IRDAI separately issued various norms on the portability of group health insurance policies issued to account holders of various banks(51) and specific norms for Corona Rakshak and Corona Kavach products.(52)
While a majority of COVID-19-related notifications are scheduled to lapse by March 2021, several insurance regulatory developments remain on the table. Notably, 2021 could witness the introduction of various new standardised products in the cyber, health, travel and engineering space, which insurers will be expected to offer in addition to their existing products, as well as an updated advertisement framework.
For further information on this topic please contact Celia Jenkins, Anuj Bahukhandi or Swathi Ramakrishnan at Tuli & Co by telephone (+91 11 2464 0906) or email (email@example.com, firstname.lastname@example.org or email@example.com). The Tuli & Co website can be accessed at www.tuli.biz.
(15) PUC Certificate at the Time of Renewal of Insurance of Vehicle – Directions given by the Supreme Court in WP(C) 13029/1985 in MC Mehta v Union of India of 20 August 2020 and the Press Release Regarding Valid PUC Certificate at the Time of Renewal of Motor Vehicle Insurance of 26 August 2020.
(17) Issuance of Electronic Policies of 4 August 2020; Issuance of Electronic Policies and Dispensing with Physical Documents and Wet Signature on the Proposal Form in Respect of Health Insurance Policies of 10 September 2020 and Issuance of Electronic Policies and Dispensing with Physical Documents and Wet Signature on the Proposal Form of 10 September 2020.
(28) Rescheduling of Term Loans in the Context of Outbreak of COVID-19 of 8 April 2020 permitted insurers to grant a moratorium of three months towards payment of instalments falling due between 1 March 2020 and 31 May 2020; COVID-19 - Rescheduling of Term Loans of 7 July 2020 extended the period further for loans falling due between 1 June 2020 and 31 August 2020; Group Credit Life Schemes – Modifications to Align the Coverage with the Moratorium Announced by Reserve Bank of India of 10 July 2020.
(31) COVID-19-Related Instructions of 30 March 2020; Additional Time Allowed for Filing Regulatory Returns of 4 April 2020; To Ensure Proper Service to Policyholders and Customers of 23 March 2020; Additional Time Allowed for Filing Regulatory Returns to All Insurance Intermediaries of 9 April 2020; Additional Time Allowed for Filing Quarterly Return – Q4-2019-20 – Regulatory Returns to All Insurance Intermediaries of 13 May 2020; Relaxation from Submission of Hard Copy of Regulatory Returns of 4 August 2020.
(32) Sub: Extension of Time Limit Applicable to Public Disclosures on Websites of 4 June 2020 extended the timeline for compliance under Public Disclosures by Insurers of 28 January 2010 by an additional 30-day period ending 31 March 2020.
(33) Extension of Timeline for Review and Updation of Stewardship Policy Based on the Revised Guidelines on Stewardship Code for Insurers in India of 30 April 2020, pursuant to which the IRDAI has extended the timelines on the subject matter to 31 May 2020; Relaxation of Timelines for Certain Provisions of the IRDAI (Reinsurance) Regulations 2018 of 28 March 2020 extended the filing to 31 May 2020; Extension of Timelines to Comply with the Standards and Benchmarks for the Hospitals in the Provider Network of 24 July 2020 by one year.
(45) The standardisation guidelines include norms issued under the Guidelines on Standardisation in Health Insurance, the Guidelines on Standardisation of Exclusions in Health Insurance Contracts and the Guidelines on Standard Individual Health Insurance Product.
(48) The Modified Guidelines on Product filing in Health Insurance Business-Norms on Proportionate Deductions of 11 June 2020 were issued further to the Exposure Draft on Modified Guidelines on Product Filing in Health Insurance Business-Norms on Proportionate Deductions of 17 March 2020.
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