Personal Finance

Key IRDAI regulations that changed face of term insurance industry in 2020

Updated : December 31, 2020 09:11 AM IST

The COVID-19 pandemic reinforced the need for better digital services all across the world.

Ever since this pandemic struck, every sector scrambled to make its services digital, convenient, simpler, and quicker.

Authored by Santosh Agarwal

The COVID-19 pandemic reinforced the need for better digital services all across the world. Ever since this pandemic struck, every sector scrambled to make its services digital, convenient, simpler, and quicker. The insurance sector in India is no exception. Treading the same path, Insurance regulator IRDAI took a lead and left no stone unturned in providing safe and convenient digital services to its customers. And amongst innumerable and profound changes brought by this tiny virus in our lives- the consolidation of digital infrastructure is a positive one and is here to stay even in the post-pandemic world.

With timely interventions, IRDAI took some bold and laudable steps. From standardization of products to covering new trends, by replacing tedious processes with simpler ones - IRDAI made 2020 a transformative year for the whole insurance industry. These changes introduced by the IRDAI made buying, understanding, and on-boarding for customers completely new and a seamless experience. Keeping pace with the rapid changes brought in the lives of people by this virus, IRDAI addressed everything on the war footing.

So, let us look at some key regulatory changes made by IRDAI in 2020 that changed the face of the Insurance sector in India:

Death Due to Pandemic Covered under Term Policy

Just a few weeks after the COVID-19 pandemic hit India, there was a lot of confusion amongst people, especially those with a term life insurance policy if death due to the pandemic will be covered under the policy. To clear this confusion, IRDAI and insurers came out stating death due to the COVID-19 pandemic will be covered under an existing term life insurance cover.

This means that if the insured person dies due to COVID-19 related complications, the death benefit will be paid to the nominee or the dependents after a valid life insurance claim is filed. This step also cleared the fog around the settlement of the death claim related to this pandemic. This direction by IRDAI not only reduced the disruptions and confusion induced by the virus but also provided much-needed relief for policyholders and policy buyers. So now every policyholder and buyer should note that no insurer can reject the claim related to the COVID-19 pandemic, and will settle a genuine COVID claim without any hiccups as per the direction of the regulator.

Issuance of Term Insurance Through Telemedical

Amidst the raging pandemic, people are reluctant to step out of their homes as the fear of contracting the virus is limiting their mobility. Thus addressing this concern, the Insurance Regulatory and Development Authority of India (IRDAI) brought in a major relief for the policyholders as it allowed the issuance of term plans through telemedical. Earlier, people who wanted to buy a term plan had to visit a medical centre for a mandatory physical test.

However, now with telemedical in place, policy buyers do not have to visit any medical centre and rather the medical screening can be done over a tele-video call. Talking about life insurance, a cover of up to 2 Crore sum-assured can be bought through telemedical. Customers are advised to provide appropriate and correct information to doctors over the phone so they face no challenge during the claim settlement process. The telemedical process is completely regulated by the IRDAI and is reliable from a customer standpoint.

E- Know Your Customer (E-KYC)

Bringing a major relief for the policy buyers amidst the ongoing pandemic, IRDAI gave green light to insurance companies to use Aadhaar-based authentication services to complete the Know Your Customer (KYC) process. This process enables the customers to fulfill the KYC requirements with the click of a button.

This move by the regulator is also seen as the beginning of paperless KYC for customers’ on-boarding journey even in the post-pandemic world. Now with digital KYC, policy buyers are no longer required to visit insurers' offices for completing a long and tedious on-boarding process.

With the introduction of e-KYC, the customers will not be required to submit physical copies of their important documents such as address proof, identity proof and photograph for policy issuance. So, the new KYC process will save time, enhance the customer experience, and will be more convenient for insurers as well as policy buyers.

Buying Term Insurance Plan with OTP

During this pandemic, people have become more apprehensive about stepping out of home or meeting anyone in person. Thus the face-to-face model of buying and selling policies where agents would visit buyers and get all the details about the buyer has been affected drastically. To get rid of the hassle associated with the face-to-face model of buying a policy, IRDAI asked insurers to make the process digital and easier for the buyers.

As per the intervention of IRDAI, the new system enables buyers to authenticate the details with one-time password (OTP) verification. This authentication will be done with the help of a link sent to customers by insurers. This authentication via OTP will be a replacement for wet signatures.

This change will allow Insurers to send the complete proposal form on the buyer's email ID or mobile number. The policy buyer will have to click on the confirmation link to validate the OTP shared with him. This important and much-required change will not only reduce the hassle involved in buying policies but will also expedite the whole process.

Digital Policy Documents

Keeping the convenience and the safety of policy buyers at the highest pedestal, Insurance regulator IRDAI in its new direction allowed insurers to issue the policy document on email. But If a policyholder asks for a policy document in physical form, the document has to be issued by insurers without levying any extra charges. This important change brought in by the regulator will expedite the policy issuance time at the insurer’s end. In addition to this, this process will secure the policy documents and improve transparency between the customers and insurers.

Introduction of Standard Term Plan

With life insurance penetration rate of 2.74 percent in India, the insurance regulator, with the aim of bringing more people under the net of insurance asked Insurers to offer standard products. The standard term plan - Saral Jeevan Bima with standard wording for sum insured is here to reduce the hassle for first-time buyers.

This policy will ensure that buying, understanding, and processing the policy remains an easy task for people belonging to all sections of society. Regular term insurance plans have different income criteria bases on which a term plan is issued to a customer. However, the standard term life insurance plan – Saral Jeevan Bima will be issued to customers without any restrictions on income, age, gender and location.

A customer can choose the sum assured as per his/her premium paying capacity. For the benefit of the customers, the plan will be available across all digital channels and customers can avail of an additional discount of 20 percent if they choose to buy the plan online. Thus this policy will be a game-changer in bringing more and more people under the life insurance net. This is a remarkable step taken by IRDA to bring people from rural backgrounds under the net of insurance.

These developments introduced by IRDAI in 2020 have changed the whole landscape of the insurance industry in India for a better future. The announcements not only benefit the consumers but also have made processes easier for the insurers.

Santosh Agarwal is CBO-Life Insurance at Policybazaar.com.

Key IRDAI regulations that changed face of term insurance industry in 2020

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