IRDA had been in news this year with a slew of changes affecting both the life and general insurance industry. It’s been a tumultuous ride for both—the insurer and insured

The Insurance Regulatory and Development Authority (IRDA) finally launched mediclaim portability in October this year after delaying the initial launch date. Pension products have now been revamped again, after September 2010 new look was rejected by insurers as well as the insured. Despite mechanical rejection of medical claims by some insurers on flimsy technical grounds, IRDA only issued a circular which has hardly made any impact on the ground.

Portability – Mediclaim portability has been on a slow take-off till now. According to Fali Poncha, a veteran of the Indian insurance industry and executive chairman, IRICS insurance broking, “The need for portability is very real and it is a step in the right direction. The real hurdle to making portability a success lies in the fact that the terms and conditions relating to pre-existing diseases (PED) and time-bound exclusions are not common to all insurers. The laid-down time schedule is fraught with practical difficulties.”

No-Claim-Bonus (NCB) allows a policyholder to get an increased sum insured (usually 5%) for a claims-free year without paying additional premium. Portability will be limited to the sum insured (including bonus). Clarity was needed on whether the new insurer will allow bonus sum insured without extra premium. Not addressing this issue will ensure that the new insurer will charge a premium on the bonus sum insured, as well. Consequently, the net effect is that the policyholder loses the real benefit of NCB.

Pension - ‘No-guarantee’ option is not on the table. With a requirement to offer non-zero guarantee, high exposure to debt will continue. The annuity phase of the product will also be from the same insurer. Captive customers for annuity phase may ensure less motivation for insurers to offer best rate.

The annuity rates will be decided at the time of vesting of pension. If at that time another insurer offers better annuity rates, the insured is stuck with existing insurer—literally rest of life. To top if off, annuity in India is taxable which itself is the biggest snag. At the time of vesting, one-third of the corpus can be taken out tax-free and the remaining will now be enforced as annuity. There is no option for taking out the balance after paying tax. Anyone still interested in pension?

Mechanical claims rejection - IRDA has issued a circular to life and non-life companies asking them not to reject claims on technical grounds like a delay in filing. Some insurers including United India Insurance were rejecting claims mechanically based on delay in hospitalisation intimation and claims filing. Many claims continue to get rejected even after IRDA’s circular. With no warning or penalty for specific insurers, will the IRDA circular be taken seriously?  

Cashless mediclaim elusive – Preferred-Provider-Network (PPN) has been created by government insurers to restrict cashless claims at hospitals who agree on the tariff rate for procedures. Government insurers have seen some success in adding high-end Mumbai hospitals like Jaslok and Fortis to its PPN list; however, the majority of big names like Breach Candy, Hinduja and Lilavati remain elusive.

ULIP to Traditional – It’s like jumping from frying pan into fire. With reduced upfront commission in ULIP, intermediaries are pushing traditional products. The acting chairman of LIC was quoted as saying, “In the past two years, we have tried to consciously shift to traditional products. Earlier, we had ULIPs and traditional products in the ratio of 60:40, which has now reversed.”

VIP – Last year it was Universal Life Policy (ULP) that IRDA suddenly discovered was toxic and decided to scrap it after it was in the market for over a year. It found its way back re-christened as Variable Insurance Policy (VIP). LIC Bima Account 1 and 2, SBI Life Flexi Smart Insurance are new VIPs in the market. A VIP worth skipping in your portfolio!

Highest NAV product - Insurance companies Moneylife has interacted with recently are not happy with the IRDA’s hint at scrapping highest NAV products. The hot topic seemed to have cooled down with IRDA still unable to make up its mind. Time will tell if highest NAV survives year 2012.

Online aggregators squeezed – IRDA’s stringent guidelines for comparison websites are seen as a deathblow for likes of PolicyBazaar.com, Myinsuranceclub.com and ApnaPaisa.com. Clamping down on advertising, ratings, endorsements or bestselling insurance products will surely help customers to get unbiased information for making a good buying decision, but restricting the lead generation fee to Rs10 is shutting the business door.

Motor insurance premium rise - In April, IRDA raised premiums for motor third-party liability insurance by up to 65%. The third-party pool has been in severe losses. From April 2012, third-party motor pool will work as a new ‘declined pool’ concept. The end result is that third-party premiums are likely to go up in 2012.