New India Assurance has coughed up Rs1 lakh as penalty for not replying to a client for seven months and ignoring the insurance regulator for a couple of months. Surprisingly, the complaint was not a valid one
It may sound strange, but the Insurance Regulatory and Development Authority (IRDA) may grant you justice just because you had to wait forever to get a response from an insurance company.
Hemendra Mehta had asked for refund of mediclaim premium for the period he was staying abroad. The regular mediclaim is not valid outside India (in some cases, it is allowed in Nepal), but most insurers will not give refund for the period an insured person spends abroad. Some including New India Assurance, allow extension of policy term to compensate for the period spent abroad.
It was clear that New India Assurance did not owe any refund to the policyholder. However, due to some misunderstanding, the insurer did respond by email stating that refund can be considered for the period of stay outside India during the policy period. New India Assurance had inadvertently not mentioned the requirement of an Overseas Mediclaim Policy to be issued by the company (to be able to get a refund on regular mediclaim policy).
Realising the error, New India Assurance's divisional manager (DM) stopped communication with the policyholder's request to get a refund. IRDA stepped in after no response was received by the policyholder from New India Assurance for four months. The insurer's head office also ignored IRDA's letter for a couple of months.
Finally, New India Assurance caved in and refunded the policyholder, stating that it has taken a 'generous view' on the matter and gave the refund as a 'special case without precedence'. New India Assurance had also requested IRDA to condone the delay in replying to the insurance regulator's communication.
Not amused with New India Assurance's delayed response, IRDA slapped a penalty of Rs1 lakh. This is because the insurer had taken more than seven months to redress the complaint of Mr Mehta and more than two months to respond to the letter of the Authority's Grievance Cell.
M Ramadoss, chairman and managing director, New India Assurance Co Ltd, told Moneylife, "I went through the papers and found that our DM had not replied to the client for seven months and our head office also did not reply to IRDA for a couple of months and hence the penalty. The deficiency is related to delay in reply. While we are taking action on the DM, we are also representing to IRDA."
While we certainly appreciate IRDA's tough stance on lack of response from the insurer, some Moneylife readers have written to us about IRDA taking a couple of months to look at their complaints. Moreover, the Insurance Ombudsman (Mumbai) takes more than six months to give an appointment in some cases. Ahmedabad has not had an Insurance Ombudsman for more than nine months and there is a backlog of cases pending with them. The customers demand justice here too.
The Consumer Education & Research Centre (CERC), a leading non-profit, consumer rights organisation, has asked IRDA to fill up the nine-month old vacancy for an Insurance Ombudsman at Ahmedabad.
Volumes may be still low compared to metropolitan cities, but higher yields, especially in home and two-wheeler loans, is making business more profitable in these places
The prospects for corporate lenders in the retail sector are brighter today in tier-2 cities like Lucknow, Ludhiana, Indore, Visakhapatnam and Madurai, which are witnessing a surge in demand especially for auto and housing loans.
These cities may not have the kind of numbers that the metropolitan cities have, but higher yields on growing numbers has made business as profitable as in the big cities for these lenders recently, according to report by CRISIL Research on "Retail loan products: Opportunities and risks beyond the metros and mini-metros."
"Stronger growth prospects, lesser competition, higher yields and profitability comparable to the larger cities make tier-2 cities an extremely attractive proposition for financiers," says Prasad Koparkar, head of industry and customised research at CRISIL.
The yield to financiers is slightly higher in tier-2 cities, especially in the case of housing loans and two-wheeler loans. It is important however, that credit quality is tightly monitored. The report also considered car loans, gold loans and loans against property.
Of course, there would be a difference in the growth prospects and asset quality; so picking the right markets will be critical to profitability. The report covers ten other tier-2 cities— Kanpur, Bhopal, Jaipur, Rajkot, Nagpur, Nashik, Mysore, Kozhikode, Coimbatore and Thiruvananthapuram.
"Contrary to popular perception, not all tier-2 markets fare poorly in respect of asset quality. In eight out of the 15 cities studied, the level of non-performing assets compares favourably with the all-India average for all five retail loan products," says Ajay Srinivasan, head of industry research at CRISIL.
Car loan disbursements in 10 of the 15 markets are expected to grow at about 20% CAGR (compounded annual growth rate) over the next couple of years. This is higher than the 13% CAGR estimated for larger cities. In seven of these tier-2 cities, loan against property (LAP) disbursements are expected to grow faster than the rest of the country. Gold loans are expected to grow more than 50% annually in five non-southern cities, according to the report.