As the Covid crisis rages across the globe, this would be the most appropriate time for the Country to evaluate the Insurance Regulator, INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA - IRDAIs role on how Insurance companies are regulated to honour their ever emphasised promises and assurances to deliver in times of dire need. It is also an opportunity to experience first-hand, the Regulators duties and powers in protecting policyholder's interest.
"The Great Lockdown "due to COVID has become a historic case of delaying, ducking, and denying of claims by the insurers and acting against the interest of the policyholders. The Insurance industry has unanimously decided to put on hold any COVID related claims of Property under Business interruption, Workmen Compensation Act and other product and liability claims. The same fate would have befallen the medical hospitalisation policy but for the timely interference of Govt of India to instruct all insurance companies to honour COVID claims. The service levels have plummeted to depths that any claim on COVID is under permanent quarantine and lockdown. It is in this context that the role of the Regulator cannot be more emphasised as to what its current actions portend for the welfare of insurance industry and the policy holders interest. For this article, let us first examine a case that has been represented to IRDAI for its consideration and why it shouldn't hesitate to act in favour of the millions of policy holders across the country. This pertains to the "adjustment" of motor premiums to millions of policy holders against the lockdown period
The Gross Written Premium (GWP) income by 34 Non–Life insurers within India for FY 2019-20 (provisional and unaudited) is Rs. 1,89,301.76 crores. Out of which the GWP under the Motor portfolio within India for 2019-20 for both Motor Own Damage and Motor Third Party is Rs. 69,208.14 crores. So, on an average, Indian Motor premium per month is Rs. 5767.34 crores. Assuming the total number of lockdown days is 45 days, the claim-free premiums available with the insurers is Rs. 8651 crores. The Lockdown is a blessing in disguise for insurance companies as there are fewer vehicles on the road meaning fewer accidents and fewer claims. Fewer claims means extra profits. Insurers are better off than before, because of this crisis. Is there is a compelling necessity to offset the above premiums based on the claims cost saved during the lockdown? Of course Yes, considering, as we may well remember, that last year IRDA had increased motor premiums across the spectrum. The premium increase were based on claims cost and the policyholders bore the brunt of that cost across India. Insurers seem to be very good at raising the rates when they perceive higher risk, but generally need to be forced to do the reverse, when there are fewer costs as of now.
Despite the best practices of foreign and JV partner insurers refunding hundreds of millions of dollars to their policyholders, citing a dramatic drop in accident claims from citizens hunkered down in their homes, the Indian policy holder continues to be discriminated and made to wait endlessly. In the meantime the all-powerful lobby are planting news across the media that Motor insurance losses are especially likely to rise to 160% in FY 2021, which has no basis at all. Needless to mention, the deafening silence of IRDA on this issue is very perplexing. A statement on the refunds of the "laid- up vehicles" would have been most appropriate. The insurers are further emboldened by the fact that an indecisive Regulator will be further silenced by the fake projection losses that are circulating. It is clearly a desperate attempt to pre-empt any directions or attempts to adjust the premiums by IRDAI.
It has to be conceded that refunds for each policy are practically impossible in our Country. However a readymade solution through the Indian Motor Tariff is available. Reference is placed upon GR 31 – Concession for Laid-up Vehicles - where individual vehicle laid up in garage and not in use for 2 months will be entitled for deductions in renewal premium OR the expiry of the current period of insurance may be extended equally to the period of lockdown / laid-up. This GR is applicable for individual vehicles laid up in garage and so when the whole country's traffic is laid up, the Indian Motor Tariff and the GR would be squarely applicable to this situation, or deemed to apply, for all practical purposes. Armed with such a Regulation, wonder why there is so much hesitation among the insurers. It's time IRDA nudges the industry on their accountability and not to rely on fine print and technicalities to avoid refund adjustment. When a specific GR 31 is available in the tariff, insurers should not attempt to reject premium adjustments on the basis of interpreting policies to their own advantage. Even assuming, but not conceding, that the motor claims for FY 2021 is to be 160% as per insurers' projections, they still, as per tariff, have to currently adjust the laid up premiums to the policyholders. By no stretch of imagination is the 45 days lockdown premium of Rs. 8651 crores to be laid on their table to suit their Investments. As directed by the Indian Motor Tariff, such savings on the premiums are to be adjusted or reduced (not refunded) as a matter of principle, particularly when the vehicle is ''Laid up''. There is no dispute that the country's traffic was laid up because of the Govt's action. Therefore, the accident free claim costs saved by the insurers on the approximate lockdown premium of Rs. 8651 crores, may be adjusted as deemed fit immediately. The bogey of 160% claims ratio can be shelved for another day.
A spotlight has been thrown on the Indian Insurers business ethics and practices because of the COVID crisis and for the sake of their customers they should come out unscathed. Is it the policyholders versus shareholders? Who is going to prevail? IRDA probably has an answer to this. The insurance industry should be living up to its responsibilities to the economy during this unprecedented crisis by making life less miserable to the millions of policyholders , their families, small businesses who are hard pressed for living and their day-to-day existence because of the pandemic. They're all haemorrhaging money and may stay insecure for months to come. Hence this premium adjustment by the insurance companies would go a long way to soften the pressure on the purses of millions of policy holders.
IRDA , a quasi-judicial authority , cannot be seen to be giving little or no weight to the significance of policy holder's demands by putting it at the back of the queue. There is not even a lack of curiosity for the policy holder's interest whereas it was so quick off the blocks to publish a public advisory throughout India to safeguard the interest of the Insurance companies on how to interpret Business Interruption policies. But if with the same enthusiasm and neutrality, if IRDA can extend the benefits of premium adjustment to its policyholders, it would have upheld its statutory obligation to protect the public. Since the premium costs saved by insurers are humungous, IRDA should ensure full transparency in protecting consumers from exploitation. No amount of explanation will justify why this premium money of Rs. 8651 crores should be left with the insurers with few risks undertaken, more so when the cost of laid-up premium adjusting norms are already available in the Motor Tariff.
It is hoped that IRDA will swing into action as any inaction, despite the name, is deregulatory. IRDA has been created with the expectation that they will use their delegated authority to protect people in the manner that legislation indicates. When an administration engages in inaction, it fails this expectation, making its action deregulatory
The very first line in : INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA ACT, 1999 - "An Act - To provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry" clearly spells out the raison d'être of IRDA .
Views Are Personal Only.(Ganesan Rajkumar, is an Advocate of the Madras High Court and a corporate insurance consultant. A senior insurance professional with domain expertise, has held leadership positions in top insurance corporates . His views are personal only. For any queries, comments or suggestions, please contact: [email protected])