IRDAI has allowed general insurance companies and standalone health insurance companies to do minor modifications to their existing policies.
Among these minor modifications, insurers can now increase or decrease premium of existing policies by 15%. That means, insurers can revise premium amount of existing policies by +-15%.
While IRDAI has allowed insures to make downward revisions to the premium amount without any criteria, insurers will have to record incurred claim settlement ratio or loss ratio of at least 130% for the preceding three financial years to hike premium amount on existing policies.
Incurred claims ratio is the net incurred claims to net premium. Simply put, it is the claims received for the premium paid towards insurance policies in a year; hence, a low incurred ratio indicates healthy growth prospects and higher profitability in non-life business. Typically, a ratio of more than 100 indicates that insurers are losing money.
Among other minor modifications allowed are
- Addition of distribution channels
- Change in frequency of premium payments
- Introduction of add ons without increasing premium
- Change to policy wordings and sum insured
- Decrease in minimum premium and increase in maximum premium
- Decrease in minimum entry age and increase in maximum entry age
- Addition of critical illnesses without increasing premium
These guidelines are operational with immediate effect.
