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Insurers To Pay Penal Interest For Delay In Settling Health Claims

Insurers will have to pay penal interest to the insured person in case they do not settle claims within 30 days from the date of receipt of the last necessary document for settlement.

In the case of delay in the payment of a claim, the company shall be liable to pay interest from the date of receipt of last necessary document to the date of payment of claim. The insurer will pay at 2 per cent above the bank rate, the Insurance Regulatory and Development Authority of India (Irdai) said. Bank rate is the rate at which the Reserve Bank of India lends money to commercial banks without collateral.

However, if the insurer thinks that the claim warrants an investigation, it has to initiate and complete an investigation at the earliest. The insurer has 45 days to settle such claims where an investigation is warranted.

“In case of delay beyond 45 days, the company shall be liable to pay interest at a rate 2 per cent above the bank rate from the date of receipt of last necessary document to the date of payment of claim,” Irdai said.

The regulator on Monday issued an exposure draft on guidelines on standardisation of general clauses in health insurance policies contracts. This comes after the Irdai unveiled a standardised health insurance product, ‘Arogya Sanjeevani Policy’, which will be offered by health and general insurance companies.

“These guidelines have been issued to standardise the common general clauses incorporated in indemnity-based health insurance products covering hospitalisation, domiciliary hospitalisation, and day care treatment. They are also meant to simplify the wordings of general clauses in the policy contracts and ensure uniformity and greater transparency,” it said.

“Irdai’s proposal to grant penal interest in the event of inordinate delay in claim settlement will help in establishing fair practices in health claims and will help in improving customer’s confidence while ensuring betterment of turn-around times for settlement,” said Pankaj Verma, head of market underwriting operations, SBI General Insurance.

The Irdai has also said if an insured person holds multiple policies during a period from one or more insurers to indemnify treatment costs, the insured person shall have the right to settlement of claim based on terms of policies. In such cases, the insurer is obliged to settle the claim as long as the claim is within the limits and according to the terms of the policy. “Insured person with multiple policies shall also have the right to prefer claims under policy for the amounts disallowed under any other policy/policies even if the sum insured is not exhausted. Then the insurer(s) shall independently settle the claim subject to the terms and conditions of the policy. When the amount to be claimed exceeds the sum insured under a single policy, the insured person shall have the right to choose insurer from whom he/she wants to claim the balance amount,” Irdai said.

Also, where an insured person has policies from more than one insurer to cover the same risk on indemnity basis, the insured person shall only be indemnified the hospitalisation costs in accordance with the terms and conditions of the chosen policy. The Irdai has also standardised wordings for provisions such as claim settlement within 30 days and cancellation of policies with a 15-day notice.

Guidelines For Insurers

*Will pay penal interest at 2% above bank rate

*Have to settle health claims in 30 days of receiving all the documents

*Insurers can take up to 45 days in case of any investigation

*Policies can be cancelled with a 15-day notice.-Business Standard