Insurance premiums unpaid during grace period can lead to rejection of claims

Insurance Regulatory and Development Authority of India (IRDAI) had extended the renewal premium payment period for insurance policies four times in view of the countrywide lockdown imposed to curb the spread of COVID-19 in India. All insurance policies whose premium fell due after 25 March 2020 could have been paid before 31 May 2020.

According to a report in Moneycontrol.com, insurance in India is a contract that kicks in only when the premium is paid. So, if the premium has not been paid even during the grace period, the insurer need not honour a claim on the policy.

This grace period is the time given after the policy expiry date, within which the policyholder can still pay the premium and avoid a policy lapse. While many needed the extended premium payment window due to a lack of funds, a few others thought of it as an opportunity to get a cover extension period and make good use of the money in the interim.

The report quotes IFFCO Tokio General Insurance executive vice president (claims) Abhijit Chatterjee saying “At present, only the duration of the grace period has been increased. The admissibility of claims will be as per the guidelines and terms and conditions. The coverage is offered for the period, for which premium is received.”

Some insurance companies have been taking a softer approach in view of the ongoing COVID-19 pandemic and honouring claims even if policyholders did not pay the premiums and have taken refuge under the grace period.

“Our priority has been to settle the claims as quickly as possible. In the prevailing circumstances, a humane approach is the need of the hour and we will be deciding on the admissibility of claims on a case-to-case basis in line with IRDAI guidelines,” said Mr Chatterjee.

Source: Asia Insurance Review

http://www.insurancealertss.com//Insurance/Service/Asia%E2%80%99s%20Finest%20CMO%20Awards%202020