IRDA has taken a huge step forward for the insured with its clear-cut definition of a ‘policy break-in’. The insured have tremendous opportunity to request insurers to consider policy continuity even if it was considered as a break-in as per a mediclaim policy’s terms of agreement
The Insurance Regulatory and Development Authority (IRDA) has quietly changed the definition of mediclaim policy break-in, in the portability guidelines which may help many policyholders who paid the premium of mediclaim after the grace period, but within 30 days of policy-end date. In this case, the insured can request the insurer to consider it as a policy without break-in, due to the new liberal definition from IRDA.
By allowing up to 30 days after policy renewal date to be considered as a continuous policy, this move will prove to be beneficial for customers. IRDA should take the next logical step and change the break-in period from 15 days to 30 days in mediclaim policies—to avoid confusion and misinterpretation of the exact break-in period.
Shreeraj Deshpande, head-health insurance, Future Generali India Insurance Co Ltd told Moneylife, "IRDA had issued renewability of Health Insurance guidelines with effect from 31 March 2009, allowing a grace period of 15 days for renewal of health insurance policies. This grace period was to condone delay in renewal of health policies up to 15 days for the sake of allowing continuity for waiting periods as well as pre-existing disease (PED) cover. However, any loss occurring during the grace period would not be covered as there is no valid insurance contract during the grace period. In the Portability Guidelines made effective from 1 October 2011, the break-in period has been defined as 30 days for policies which are being ported from one insurer to the other—or from one plan of the insurer to another plan of the insurer."
According to Subrahmanyam B, vice president & head-health vertical, Bharti AXA General Insurance, "I feel that IRDA is defining the break-in policy with prospective effect and in respect of portability policies only. I would imagine that if it is our own renewal, the 15-day grace period would apply."
There seems to be confusion due to the new definition of break-in period for portability and there are good chances of the same being applicable for not just portability but also for mediclaim policies. According to the head underwriter of a private insurer who spoke to Moneylife preferring anonymity, "We have approached the General Insurance Council to seek (a) clarification. If IRDA sticks to the 30-day break-in period for portability consideration, then the mediclaim policy will also have to allow for a 30-day grace period."
In some cases, insurers did not consider it as continuous coverage even if premium was paid within the grace period. According to Rohan Dukle, director, Magus Corporate Advisors Pvt Ltd, "We have had claims which come up years after they are condoned (premium payment during grace period); the claims have been rejected since the policy period is broken in-effect. I have taken one such case to the Ombudsman, since the insurers, after having given a no-claim-bonus (NCB) which ratifies the condonation, still consider that there has been a break-in in the policy. You will notice that the definition by IRDA does not leave any room for doubt, but is a clear-cut definition."
He added, "This therefore is a huge step forward for the insured. The question that remains, however, is whether in the current instance, IRDA is stating what it feels is obvious, defining the same with prospective effect or defining the same with retrospective effect."
Apart from definition of policy break-in, IRDA has also quietly disallowed NCB at porting, even if the terms & conditions seem to allow NCB porting. The new insurer will charge premium on the full sum insured (including the bonus) which in effect makes NCB a lost cause.
IRDA has also failed to address another major issue, that is, the medical conditions developed by the policyholder with the old insurer. For instance, if a policyholder has no pre-existing diseases (PED) when the initial policy was taken, but has developed conditions over the next couple of years. If the policyholder wishes to port to a new insurer who has a standard four-year PED waiting period, the new insurer will make the policyholder wait for a couple of years to cover these conditions. These are considered PED with the new insurer even though they consider the time spent with the old insurer. In this case the policyholder would be better off with the old insurer as there is no PED and hence all the conditions are covered with no waiting period.
A Mangalore resident’s ticket-booking transaction was denied, though the amount was credited to IRCTC; despite repeated attempts, the issue is lying unresolved since the past eight months
Passengers have time and again complained about the ticket-booking system on the portal of the Indian Railways Catering and Tourism Corporation (IRCTC) Limited. Now there are some concerns over its refund mechanism for the failed transactions. The problem arises when the transaction fails and money is debited from the customer's bank account, be it through a debit or credit card, without the ticket being generated.
Now it appears that the complaints of non-refund of failed transactions remain unresolved. Take the case of Ramesh Shenoy, a Mangalore resident who has not been refunded for the failed transaction that took place eight months back.
On 20 January 2011, Mr Shenoy tried to book railway tickets for the Yashwantpur-Kanpur Express through IRCTC. Even after four attempts, his transaction failed, though the amount was debited from the bank account, which he holds with Canara Bank. Mr Shenoy, who is also a former banker, further investigated with the bank's Internet division, where it was confirmed that Rs8,328 had been credited to IRCTC, giving the details of the 'strings' from the 'switch log' of the Internet records.
He also checked his account on IRCTC using his username, but there is no evidence of IRCTC having received the credit for the operation.
"The details as in the Web (register) using my user ID reveal (details) about the transactions, but (there is) no evidence of credit having (been) received by IRCTC," Mr Shenoy told Moneylife.
Over eight months, Mr Shenoy has sent details about the failed transaction and contacted the customer care division of IRCTC numerous times, but nothing has been done so far. "I have sent emails, along with proof from the bank that the amount was credited to it (IRCTC). But there has been no reply from it and the issue remains unresolved."
"It should be possible for the Internet Division of IRCTC to trace the credits with the details of 'strings' provided by Canara Bank from the switch log, and arrange for the refund," he explained.
But Mr Shenoy is undeterred and he will continue his fight. He plans to file a Right to Information (RTI) application to trace the links of his credited amount from IRCTC. "It appears that the credits received by IRCTC must be in the suspense (account), awaiting details. Maybe an RTI query can reveal this."
Moneylife sent an email to IRCTC, which has acknowledged the complaint and agreed to pursue the matter. It remains to be seen if it will act on this confirmation.
Kingfisher Red gets the boot, Vijay Mallya says that the debt-plagued airline was exiting its low-cost operations because of "intense competition" and insists that the carrier has "several initiatives" in its kitty
Vijay Mallya, chairman of private airline Kingfisher Airlines, announced at the company's annual general meeting (AGM) today that the company was exiting its low-cost operations-Kingfisher Red—and would concentrate on its full-fledged service. Kingfisher has decided to quit the low-cost service due to "intense competition", according to Mr Mallya.
"We have several initiatives. We are doing away with Kingfisher Red because we don't intend to compete in the low-cost segment," Mallya told reporters at Bengaluru after the company's AGM.
During the quarter ended June 2011, Kingfisher reported an EBITDAR (Earnings before Interest, Depreciation, Amortisation and Rentals) margin of 15.4%, which compares favourably with figures like 6.4% and 7.2% reported by other airlines.
But debt remains a huge drag on the airline.
"Kingfisher implemented a debt-recast package during the year under review, pursuant to which loans from bankers in excess of Rs1,300 crore and funds from promoters of approximately Rs745 crore were converted into share capital," said Mr Mallya.
"Further, the interest rate on the recast loans was lowered to 11% and the period of repayment was extended to 9 years. Kingfisher continues to work with the consortium of banks with a view to further reduce the interest cost," Mr Mallya informed the company's shareholders.
The axe had to fall on the low-cost operations. "We believe there are more than enough guests who prefer to travel the full-service Kingfisher Class, and that shows through in our own performance where the load factors in Kingfisher Class are more than in Kingfisher Red," he said.
Some of the proposed initiatives taken by the airline include sale and lease-back of some of its aircraft and other assets to reduce loans and converting part of its rupee loans into low-cost forex loans based on existing forex cash flows.
The Indian aviation industry is burdened with the high cost of ATF (aviation turbine fuel) coupled with a weakening rupee, he said. "As far as dues to the oil companies and airports are concerned, Kingfisher is complying with the agreed payment arrangements," he added.
Clarifying about some statements made by the company's auditor earlier this month that its net worth has eroded, Mr Mallya said, "The airline continues to work aggressively to raise fresh capital."
Post the debt-recast exercise which was implemented in December 2010, long-term funds amounting to over Rs500 crore have been infused into Kingfisher.
But it will not be easy going for the airline. Yesterday, 27th September, 13 flights of Kingfisher Airlines were cancelled due to "scheduled maintenance."
"Some flights have been cancelled due to scheduled maintenance and this is planned in advance," the airline had said in a statement. On speculation that the cancellation was due to non-payment of fuel dues to oil marketing companies, the airline had said, "There is absolutely no issue with fuel dues. We are in full compliance with the payments terms with oil companies as mutually agreed from time to time."
The flights that were cancelled yesterday include Chennai-Port Blair, Chennai-Rajahmundry, Chennai-Tiruchi, Chennai-Salem, Chennai-Coimbatore, Chennai-Visakhapatnam and Chennai-Madurai, airport sources had said, according to reports.
Private carriers have also been battered in domestic markets. Shares had tanked as much as 8% on the BSE (Bombay Stock Exchange) in September as a weak rupee put pressure on their operating margins. Concerns over the EU debt crisis and a weak economic recovery are also not helping, either.
The movement of the rupee impacts operational expenses of aviation companies as payments for leasing or purchase of aircraft, fuel purchased abroad and spares are generally made in dollars. Treasury managers have said that unless there is stability in the euro-zone, the rupee may touch the sensitive Rs52 a dollar mark in the medium-term, if it does not breach this level. Analysts had also warned that aviation stocks could see further selling pressure in the coming weeks.