Changes In Govt Fin Schemes, Insurance Plans Are Beneficial

In a revolutionary move the regulator has direct the companies to offer plans to wider scope of individuals that include persons with mental health conditions, special children, transgenders and persons infected with HIV or AIDS. It has also clarified that no claim can be denied by the insurer after 5 years

As part of rationalisation across financial products, new norms have come into effect starting 1st October 2024. This spans across market regulators and avenues starting from small savings schemes to mutual funds to insurance. These new rules reflect the government’s endeavor to simplify financial processes, improving transparency and bringing investor-friendly mechanisms.

The government has revised rules for Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY) and Post Office Savings Schemes. Moving forward only one PPF account is allowed for minor, removing multiple accounts that were allowed to be existent till now. If more than one account is operated, the additional accounts are deemed ‘irregular’. The main account is, however, is treated as the primary and earns the prevailing interest rate, if within the annual cap. Balances from secondary accounts will be merged and any excess amount will be refunded at 0 per cent interest.

Tightening the regulations, those non-resident Indians (NRI) operating PPF accounts without updating their residency status will no longer earn any interest. Similarly, SSY accounts opened by the grandparents without proper guardianship will now require a transfer to legal guardians or natural parents.

If the health insurance policy is issued before March 2024, then there’s a slew of changes, of course, in favor of the policyholders. The new regulations from Insurance Regulatory and Development Authority of India (IRDAI) has reduced the waiting period of pre-existing illnesses from the current 48-month period to 36 months. Also, the regulator has done away with maximum age limit for policyholders to buy a health plan. So, anyone can opt to buy a health insurance plan.

In a revolutionary move the regulator has direct the companies to offer plans to wider scope of individuals that include persons with mental health conditions, special children, transgenders and persons infected with HIV or AIDS. It has also clarified that no claim can be denied by the insurer after 5 years. According to the new norms, no claim can be contested by the insurer on the grounds of non-disclosure and misrepresentation after 5 years. Though, if an insurer establishes any fraud, such a claim can be contested even after 5 years.

Another important development is that policyholders can discontinue their health plan anytime and obtain refund of premium on pro-rata basis. Policyholders will have an option to discontinue the policy and get some refund whenever an insurer denies their claim request. Moreover, if the insured doesn’t make a claim in a year, they could opt for either reduction in the renewal premium or increased sum assured making way for meaningful non-claim benefits.

The regulator also notified that the insurers and/or third-party administrators (TPA) to collect the required documents directly from the hospital and not insist the policyholder to submit these documents again to make a claim request. Adding to the rules is the setting up of claims review committee (CRC) by the insurance companies, to review the rejected claims by the insurer.

The IRDAI also made some crucial changes in the life insurance sector. It has directed the life insurers to offer a Special Surrender Value (SSV) for traditional endowment policies so that exiting policyholders end up with higher refunds. The regulator has asked the insurers to mention the Guaranteed Surrender Value (GSV), SSV and the payable surrender values separately in the benefit illustration going forward.

(The author is a co-founder of “Wealocity”, a wealth management firm and could be reached at [email protected])