GST clarification-a relief for insurers
The GST Council took a decision not to levy tax on insurance premium and reinsurance commission, retrospectively. Co-insurance is an age old practice whereby more than one insurance company, insures a risk jointly. There is commission involved in this activity and earlier there had been a move to tax both these under GST. It had led to jitters in the industry as the amounts involved would have been huge. This clarification would provide considerable relief to insurers.
Brick and mortar offices
In an interesting development, the regulator has asked for opening of more brick and mortar offices. With increased reliance on digital medium, this direction goes against the grain. The rationale is that, physical presence helps in gaining customer confidence, particularly in remote locations. As per the Annual Report of 2023, there were 11,256 life insurance offices as on 31 March 2023. Around196 new offices were opened during the year. LIC had offices in 92 per cent of the districts, while the private sector insurers covered 81 per cent. This was however, a steep reduction in the number of offices of the general insurance companies with the number coming down from 10,775 to 9917 offices, a reduction of 858 offices! This has been due to large-scale closure by the government companies. But the private ones have opened a few offices during this period.
Insurance Trinity
The insurance trinity according to the regulator is – Bima Vistar (the combined life, health and general insurance product), Bima Vahak (the intermediaries who would spread the product) and Bima Sugam (the online platform for premium and claims). Updates on these have been lending some clarity. In the meantime, there has been a call from the brokers asking for the Bima Vahaks to be appointed by them also.
Non disclosure of pre-existing conditions
Quite a few significant changes have been brought in health insurance. Insurers now cannot reject claims or deny renewal on account of non-disclosure of pre-existing conditions. This non-disclosure should however not be intentional, with a view to commit a fraud. How this would work out in practice is to be seen. The waiting period limit for pre-existing diseases has also been reduced to three years from the earlier four years.
Quicker cashless approvals
The regulator has now mandated cashless claims settlement regardless of whether the hospital is in the network or not. The speed of processing has also been mandated to be within one hour. Similarly, discharge approvals should be completed within three hours. As of now, both these take time, causing a lot of tension to the policyholders. Quite often, in view of the urgency and delay in authorisation, hospitals insist on deposit amount to be paid, before commencement of treatment. Even at the time of discharge, delays in final approval from the insurers could lead to an extra day being charged.
Ayush
Ayush is an acronym which stands for ayurveda, yoga, unani, siddha and homeopathy treatments. These are traditional forms of treatment which had received a step-motherly handling from the insurers. Now they are to be treated at par with other treatments. The regulator has specified that insurers shall have a board approved policy for the coverage.
Portability
Portability is a term used for shifting of a policy by the policy holder from one insurer to another. Now within five days of receiving a porting request the insurer must communicate the decision. In such cases, the no claim bonus, waiting periods, coverages, moratorium period, sum insured, also get transferred.
Wider coverages in health
IRDAI has also called for insurers to provide a broader range of coverage like domiciliary, hospitalisation, outpatient treatment, day care, home care, etc. Of course, these need not be part of every insurance project but would be given as add-ons. The only issue is, if there are too many options, the policyholder would get confused and the purpose of giving additional coverage would be lost. But it is possible to devise products which could be simple and easy to understand.
Cyber warning
The legendary investor Warren Buffett recently warned that cyber security issues are getting overlooked as agents rush to sign up clients. This sort of proved to be prophetic. Shortly thereafter came the crowdstrike episode of Microsoft which stalled operations of a whole lot of sectors globally. This could have an impact on the insurance sector, by way of business interruption claims. It would be interesting to see how things develop in this regard.
The Budget and way ahead
The budget just provided for some marginal changes in the TDS with regard to commissions and premiums. It was even silent about the fate of the government insurance companies. On the other hand, the Economic Survey had a lot more details on the sector. It quoted from the Swiss Re report, indicating that the industry can look forward growth in the coming years. The Survey also appreciated the steps taken by IRDAI with regard to simplification of the regulations. It has however expressed concern over the aspect of mis-selling in the insurance sector by referring to the two lakh plus complaints registered in the portal. This could be a deterrent for insurance penetration and the Survey called for steps to ensure quick and correct settlement of claims.
