Go Digit Told To Stop

The Insurance Regulatory and Development Authority of India (Irdai) asked Go Digit General Insurance (Go Digit) to discontinue a product offering life insurance benefits in violation of regulatory norms. Irdai issued a show cause notice (SCN) was issued in August 2021 as deficiencies were observed in complying with the provisions of Insurance Act.

The regulator said no insurer shall carry on any class of insurance business in India unless it has obtained a certificate of registration for a particular class of insurance business. The matter relates to modification in the Digit Group Total Protect Policy by the insurer in July this year, under which one additional section by name of 'Major Illness Plus Cover' was incorporated in the policy.

Modified Product - The regulator said upon examination of the modified version of the product, it was found that it offered two benefits in the event of triggering of the covered contingent event. One of the benefits relates to payment of sum insured on diagnosis and/or surgical procedure of major illness. The product offers insurance coverage to 82 major illnesses.

Another relates to payment of an additional benefit amount in case the policyholder does not survive till the end of the policy period owing to the same major illness and/or surgical procedure for which the claim was admitted. Irdai said providing additional benefit amount to the nominees/legal heir of the policyholder in case of non-survival falls within the definition of life insurance business.

Appeal - Following further hearing on the matter and personal hearing Go Digit contended that the benefit offered under the proposed clause does not fall under life insurance business but under miscellaneous insurance business defined under Insurance Act, 1938.

The insurer had also requested the Authority to withdraw the communication and SCN issued in the matter. The Authority said the request of the insurer was not acceptable and said providing the death benefit cover or the assurance of payment of money on death of the policyholder itself falls within the definition of life insurance business, though limited to the major illnesses named in the policy.

The insurer's claim that the additional benefit offered in the product squarely falls within the ambit of health insurance business and it is permitted to carry on this business is not found tenable.