Insurance industry regulator IRDAI has asked general insurance companies to maintain continuity of health and third party motor insurance policies in case the renewal premium was due for payment between March 25, 2020 and April 14, 2020.

The department of financial Services through a series of notifications on April 1, 2020 extended the deadline for renewal premium payment for health and third party motor policies if the due date falls between March 25 and April 14 to April 21, 2020.

But no such extension has been given for the optional own damage component. This will make it difficult for policyholders who have a comprehensive motor policy to avail themselves of the benefit of the extended deadline.

“When the policy is issued after receipt of premium due on or before the last date (April 21), it shall be ensured that the period of cover commences from the date the renewal was due without there being any break in the policy period provided such renewal fell due within the lockdown period (25th March, 2020 to 14th April, 2020),” IRDAI non life member T.L. Alamelu said in a circular.

This implies that if an existing policy expires on March 27 and the renewal premium is paid on April 20, the renewal of the policy shall be effective from March 28.

The policyholder would have to pay the renewal premium for the entire period of 12 months from the due date on or before April 21.

The regulator has further directed the insurance companies to communicate to the policyholders through email, SMS and phone along with displaying the information on their websites and raise awareness among agents and intermediaries.

Extension adequacy

The short extension period of payment of renewal premium has raised a question mark especially when banks have given a moratorium of 3 months on EMIs.

According to industry observers, a few factors are to be taken into account which make the deadline adequate unless the lockdown is extended. First, such extension can only be initiated by the Centre under an extraordinary circumstance. Moreover, the discussion on extending the deadline was taken much before the notification was issued in March.

Grace period

Regulator IRDAI has provided an additional 30-day grace period for policyholders to pay premium on life insurance policies, whose renewal date fall in March and April amid the lockdown to fight against coronavirus pandemic.

IRDAI further said where unit-linked policies mature (up to May 31, 2020) and fund value is to be paid in lumpsum, life insurers “may offer settlement options” in accordance with relevant regulation.

‘This one time option is regardless of whether such option exists or not in the specific product,” IRDAI said.