How new laws are helping insurance policies improve

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Quite a few, new insurance regulations have been proposed and they will ultimately benefit the policyholder. These regulations are in regards to life insurance plans- both the conventional ones, as well as the unit- linked insurance plans. They also cover health insurance, TPAs or Third Party Administrators and fixed benefit critical illness. They will also cover personal accident plans and will look into insurance distribution and will facilitate product innovation as well.

The objective of the laws of life insurance is to encourage innovation in pure- risk term plans and to find solutions to the issue of high lapse rate. Insurers can now issue policies for even one month in term insurance which was earlier not allowed for less than a year. The insurers will also respond with the launch of low- value term plans for certain specific purposes that outstanding credit card bills or for a vacation. Term plans were always comprehensive and had low restrictions than personal accident insurance plans which are available for short term only. The issue of high lapses is addressed with the increase of reinstatement period and a lapsed policy is often revived by making a declaration that the policy holder is in good health. This is applicable for two to five years in traditional plans and also three years in ULIPs. Sometimes, policies lapse because the policy holders no longer can afford to pay. With the new products, the insurers will be offering a chance to reduce the premiums by almost 50% after five years. Insurers might also be collecting renewal premiums three months before the date is due. The product flexibility is also changed and product misspelling issues are also going to be addressed.

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Some other areas have also been brought under the purview like in case of ULIPs, previously, there was no overall limit on the total charge. Now individual caps would be in place. A committee report that is going to restrict the exclusions has also been published and it has been made to the advantage of policyholders. Also, a look back period of eight years has been introduced as well and as far as pre- existing illnesses are concerned, their definitions would change. It has also been stated that the diseases that were contracted after the insurance was bought also needs to be covered.

The aforementioned look back period entails that a claim will not be rejected after eight years unless a case of fraud has been definitely proven. In the case of life insurance too, there is a similar rule where the claim cannot be rejected in three years time. Insurance companies often reject claims on the basis that there were pre- existing illnesses, before the purchase of the insurance. Now, the insurers will have to classify ailments on the basis of the fact that whether the symptoms existed only or whether the disease was diagnosed. Now, a condition can only be classified pre- existing, if the medical condition was diagnosed or treated before. Also, diseases such as HIV, Parkinson’s and Alzheimer’s, which were contracted after the insurance policy was taken, would now also have to be included.

It has also been stated that no ambiguous words are going to be used like directlyindirectly and such as. Insurance lawyers, are also required to brush up on their writing skills. Also, chronic conditions like hypertension and diabetes will not have a waiting period of more than 30 days. Also, critical illness and personal accident premiums can be now paid in installments.

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It is expected that with these changes, it will be easier to bring more transparency to those who seek insurance.

Shailesh Kumar

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