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C.R. Sukumar

HYDERABAD, Sept. 6

IN a major blow to lakhs of personal accident policyholders across the country, the four public sector general insurance companies — National Insurance Company Ltd, Oriental Insurance Company Ltd, United India Insurance Company Ltd and New India Assurance Company Ltd have collectively decided to cancel all the policies under the long-term personal accident insurance scheme, constituting premium collections of over Rs 400 crore.

While the first three companies were learnt to have initiated steps to cancel the policies quite some time back, the latest insurance company to resort to such a move is New India Assurance Company Ltd.

According to the officials at one of the Government-owned insurance companies, the decision on the issue was arrived at with the consent of the Insurance Regulatory and Development Authority (IRDA) in view of the abnormally high claims witnessed from the policyholders, which amounted 16 to 20 times more than the premiums collected in some pockets of the country.

As against the premium collections of around Rs 400 crore for the 15-year tenure policy, the four insurance companies are learnt to have received claims worth around Rs 700 crore in the last three years, with a risk period of 12 years still left.

However, senior IRDA officials, when contacted, told Business Line that it was purely a collective decision of the public sector general insurance companies to cancel the personal accident policy and the insurance regulator was in no way involved.

In view of the continuous adverse claims ratio in respect of long-term personal accident insurance policies and also anticipated claims during the balance risk period of 12 years, the insurance companies decided to cancel the policy and annul the certificates of insurance issued earlier to the beneficiaries under these schemes.

All the four insurance companies invoked a clause in the personal accident policy certificate, which enables the insurers to cancel the policy at any time by simply serving a notice on the policyholders. The insurance companies have decided to return to the insured the pro-rata premium for the unexpired policy period after deducting some amount from the original premium paid for the period already covered. While the insurance companies have decided to retain the premium of around 24 per cent, they intimated the insured that an amount of little less than 76 per cent of the premium amount for the unexpired policy period of 12 years would be refunded.

The insured were advised to return the refund vouchers attached to the notices served on them by the insurers along with the original certificate of insurance to obtain the refund amount.

Stating that the notice of cancellation that was posted to the address given by the insured was quite sufficient for discontinuing the accident policy, the insurance companies told the insured that irrespective of the fact whether the insured received and/or returned the refund voucher or not, "the coverage under the policy automatically stands cancelled and the insurance company will not take any responsibility for the claims that may arise" after the date of cancellation of the policy.

Some of the significant groups covered under this long-term personal accident policy include the judiciary, employees of multinational companies, members of the insurance and bank unions, credit cardholders and traders.

While declining to divulge the identity of the groups that resorted to large-scale abnormal claims, which the insurance companies suspect are fraudulent in nature the insurance company officials said the maximum number of such claims came from the Northern India, especially States such as Bihar and Uttar Pradesh.

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