The regulatory reform from IRDAI that attracted the maximum attention was the change in computation of surrender values and charges for endowment policyholders, but the regulator modified several other rules that directly affect retail life, health and general insurance policyholders.

2024 has witnessed a series of insurance regulatory changes in the insurance space, the more prominent among them being the new surrender value rules for endowment policies on the life insurance side and shorter moratorium and waiting periods in the health insurance segment.

Higher early-exit payouts

IRDAI’s new product norms that came into effect promise higher special surrender values, or premature exit payouts, to policyholders. These will primarily affect policyholders who purchase non-participating, guaranteed-return endowment plans.

Those who feel they are stuck with unsuitable, mis-sold policies and want to make an early exit or those who find themselves unable to continue paying regular premiums will now get back a larger chunk of the premiums  they have already paid.

According to Emkay Global, a financial services provider, a policyholder who purchased a guaranteed endowment policy with a tenure and premium paying term of five years after paying an annual premium of Rs 1.2 lakh will now get Rs 1.08 lakh if she surrenders her policy in year 1. This is assuming a G-sec rate of 7.2 percent and discount rate of 7.7 percent (G-sec plus 50 basis points). Before the rules came into force, she would not have been entitled to any premium refund.

Health insurance moratorium period down to five years

Starting this year, all health insurance policies will come with moratorium periods of five years, down from eight years earlier.

“After completion of sixty continuous months of coverage (including portability and migration) in health insurance policy, no policy and claim shall be contestable by the insurer on grounds of non-disclosure, misrepresentation, except on grounds of established fraud. This period of sixty continuous months is called as moratorium period,” IRDAI’s updated regulations say.

That is, if your policy has been in force for five years, your insurance company will not be able to reject claims citing failure to disclose your health status. If they still do, you will have a stronger case when you escalate your complaint to the insurance ombudsman offices.

Refined PED definition, shorter waiting periods

Health insurance policies carry waiting periods for pre-existing diseases (PED) for declared illnesses. What this means is that the insurer will begin covering for illnesses or health conditions declared at the time of buying the health insurance policy after the specified period is over. This year, the IRDAI shortened the maximum waiting period under this rider from four years to three. Do note, however, that even today, several insurance companies offer products with a waiting period of less than three years. In the case of some dedicated policies such as senior citizen plans, it can be as short as one year.

Likewise, until the new regulations came into force, PEDs were defined as conditions or ailments for which policyholders had received treatment or diagnosis from a physician up to 48 months prior to policy purchase. Now, this timeframe has come down to 36 months.

New policies only in electronic form

From April 1, the regulator has made it mandatory for insurance companies to issue insurance policies only in the digital form, to be held in e-insurance accounts.

Like dematerialised or paperless shares, the e-insurance account framework involves issuing and holding policies in the electronic form. It can be opened at the time of buying a fresh policy, which will then be credited to the account. In such cases, insurers will facilitate the entire process.

You can also convert existing, physical insurance policies into electronic form. You can open an e-insurance account by downloading the forms from the portals of insurance repositories. You will need to submit KYC or know your customer documents such as Aadhaar and PAN to the repository. You can also complete the KYC process online using Aadhaar or DigiLocker.

Simple-to-understand information sheets

Insurance companies now have to issue Customer Information Sheets (CIS) along with the policy documents. The CIS will contain information on key clauses, policy benefits, premiums, and terms and conditions in simple language and a concise manner. The purpose is to ensure that policyholders who find the legal language to be too complex can easily comprehend the key clauses and features that will affect them.