The Securities and Exchange Commission of Pakistan (SECP) has proposed new rules to protect insurance customers and reduce long delays. The proposed rules will apply only to individual insurance policies.
A major part of the new framework is the introduction of fixed deadlines for insurance companies. The rules clearly define what insurers must do from the time a policy is issued until a claim is settled and paid.
Companies will have to decide a claim within 20 days for life insurance after receiving all relevant documents. Motor insurance claims must be decided within five days after receiving the survey report. Other non-life insurance claims to be decided within seven days of the survey report. Once a claim is approved, payment must be made within seven days.
Health insurance customers will also receive stronger protection. An insurance company will have only three hours to approve a patient’s discharge from hospital. A patient cannot be prevented from leaving the hospital simply because the insurance company has delayed its decision.
Insurance companies will only be allowed to ask customers for documents that are relevant to their claims. They will also have to publish information about settled, rejected and pending claims. This will include the claims that have remained pending for more than one year, and the information must be made available on company websites.
Moreover, the proposed rules also set deadlines for issuing policies. Applications for new insurance policies to be processed within seven days. Life insurance policy documents must be issued within a maximum of 20 days, while policies sold through digital channels must be issued within three days.
Additionally, motor insurance will require companies to tell customers the current market value of their vehicles. Customers must also be informed about the effects of over-insuring or under-insuring a vehicle. Approved vehicle repairs following a motor insurance claim should normally be completed within 15 days.
However, insurance companies that violate the proposed rules could face fines of up to Rs1 million, while continued violation could charge an additional penalty of up to Rs10,000 per day may be imposed.
The SECP has given the public and industry stakeholders 30 days to submit suggestions or objections. After the consultation process is completed, the proposed rules will be presented to the SECP Policy Board for approval.
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