The COVID-19 pandemic has brought home the significance of health and life insurance like nothing else earlier. Even those who were blasé about these covers in the past are now looking to buy a new policy or want to enhance the sum insured on their existing ones. Meanwhile, the Insurance Regulatory and Development Authority of India (IRDAI) has been issuing a slew of guidelines to health/general and life insurance companies aimed at easing matters for customers.
Sanjay Kumar Singh, Business Standard
Pay health insurance premiums in instalments: Through a circular dated April 20, 2020, the regulator has permitted companies offering health insurance to allow customers to pay their premiums in instalments. With many customers expected to face financial hardships amid the lockdown, this step will ease customers’ burden. “It is an attempt to provide an affordable option to customers, and encourage more people to buy health insurance," says Prasun Sikdar, managing director and chief executive officer (CEO), ManipalCigna Health Insurance.
Some insurers will charge the same premium under all options. “The premium amount will remain the same irrespective of the mode of payment," says S. Prakash, managing director, Star Health and Allied Insurance. Brokers, however, inform that some companies may charge you an extra amount if you go for any option other than annual.
The burden of paying the premium does get eased in a frequent-payment option. “In some COVID-19 cases, treatment costs have gone as high as Rs 14-15 lakh due to accompanying complications. If the sum insured on your family floater is not adequate, use the monthly payment option to enhance your cover,” suggests Amit Chhabra, business head, health insurance, Policybazaar.com.
Approval within two hours: At the time of admission, patients sometimes have to wait for a long time before the insurer gives its pre-authorisation for cashless treatment. IRDAI has directed insurers to give it within two hours (the same limit applies at the time of discharge). IRDAI had also said earlier that COVID-19 cases should be treated on a priority basis and before any claim for this ailment is rejected, it should be reviewed by the claims review committee (a high-level committee) of the insurer. IRDAI has also asked insurers to simplify procedures, which means they should not ask for too many documents or conduct time-taking checks.
Thirty days’ grace period: Most health policies offer a grace period of 30 days for payment of renewal premium. Now, IRDAI has offered an additional grace period of 30 days, so that customers who use offline payment modes like cheques are able to pay once the lockdown ends. “Both continuity of cover and continuity of benefits will be available to customers if they pay within the grace period,” says Prakash.
Health policies have a waiting period for pre-existing diseases (PEDs) ranging from two-four years. If you fail to renew within the grace period, you will have to buy a new policy and the waiting period for PEDs will begin all over again.
Claims procedure simplified: The regulator has also asked insurers to simplify the claims process for COVID-19 deaths. “If the claim form states that a death took place due to COVID-19, we will not ask for additional documents. We will process the claim based on just a death certificate or a hospital document,” says Anil. Normally, insurers ask for treatment records, and sometimes they investigate cases.
More time to pay premium: A 30-day grace period has been extended to life insurance customers too. Life insurers offer a 15-day grace period in the monthly payment mode and a 30-day grace period in other modes. Now, the effective grace period becomes 45-60 days.
If you fail to pay the premium within the grace period, you can revive the policy within the next six months by paying the premium outstanding and the interest charge (sometimes waived by insurers). If even this period has elapsed, you will have to undergo fresh medical check-ups.
Grace period for settlement in Ulips: In all unit-linked insurance plans (Ulips) that mature by May 31, 2020, the regulator has asked insurers to give customers the settlement option. Instead of receiving the fund value as a lump sum, they can receive it over five years, with a minimum 20 per cent payout at the end of each year. “This option has to be provided irrespective of whether this feature was originally available in a Ulip product,” says Anil PM, head-legal and compliance, Bajaj Allianz Life.
If, after a couple of years, customers wish to withdraw the balance as a lump sum, they can do so. “The net asset values (NAVs) of Ulips and their fund values have seen steep erosion in this market correction. If customers avail of this extension, the markets will hopefully recover after some time and their fund value will be protected,” says Mohit Garg, head of products, PNB MetLife Insurance.
Customers who don’t need the money urgently may go for this option. Besides recouping a part of their fund value, they will get a tax-free income stream. “If the cover is at least 10 times the premium, then even the settlement payouts will be tax-free,” says Sanjay Tiwari, director-strategy, Exide Life Insurance.
A lot of demand destruction has occurred in economies across the globe. Governments are expected to support both families and businesses and thereby prevent demand from collapsing. “Governments will issue treasury bills and central banks will purchase them. Expanding government fiscal deficits and printing of money by central banks will cause currency depreciation, which will, in turn, support the price of gold,” says Kishore Narne, associate director and head of commodities and currency, Motilal Oswal Financial Services.
Of course, there are opportunities. The three major market cap indexes — large, mid- and small—are down 21-32 per cent over the past year. “The correction means you would have fallen behind on your goals. You will have to either save and invest at an accelerated pace, or push your goals back by a couple of years,” says Avinash Luthria, a Sebi-registered investment advisor and founder, Fiduciaries. For those who have suffered a salary cut or job loss, investing more may be difficult in the near future.Moreover, most of the liquidity that central banks pumped in during the last crisis did not get unwound. Now that another crisis has hit, more money is being printed. This is expected to result in the permanent debasement of currencies. In such an environment, an asset like gold, which cannot be debased by central banks, gains in value.
The US dollar is strengthening currently, but this trend may not last. “Due to the deficit and debt that the US is incurring today, the dollar may not remain strong for long,” says Mehta. Moreover, in an environment where equities, debt, and real estate are unlikely to perform, gold may also benefit from the TINA (there is no alternative) factor.
A few factors could slow down gold’s rally, though they are unlikely to alter its direction. “Central banks bought 658 tonnes of gold in 2019 — the second-highest in the past 50 years. This year onwards, many central banks may sell some of their gold holdings to support their economies. This could slow down the pace of the rally,” says Narne.
If the panic caused by the pandemic abates, that too could cause the rally to slow down. “The pandemic is peaking in a lot of countries, and they are now slowly opening up again for business. Hence, gold prices may not rise in the same manner as earlier,” says Ketan Kothari, director, Augmont, a gold refiner and bullion producer.
According to him, a lot of people may also sell gold at the current high levels to meet their other financial needs.
After gold’s recent high of Rs 47,327 per 10 grams on the MCX, some profit booking appears likely. “A correction of 8-10 per cent from the recent all-time high would be a good level for new investors to put money in the yellow metal,” says Rupak De, senior research analyst, IIFL Securities. New investors should use corrections in the yellow metal to build allocation over the next six to 12 months.
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