IRDA clarified that under lender-borrower scheme life insurance companies will make payment of outstanding loan to lenders in case of eventuality to an individual covered under the group insurance scheme, reported PTI.
This is for insurance cover taken against housing loans, personal loans etc.
"The Life Insurance Companies shall obtain from the master policyholder, a credit account statement in respect of the insured member to whom/whose nominee or beneficiary the claim monies are payable on the happening of the insured contingency," the Insurance Regulatory and Development Authority (IRDA) said.
Under the lender-borrower scheme, person applying for a loan is offered an insurance policy to cover it.
This comes under an arrangement between insurer and lender to offer insurance product to a borrower to prevent them from being burdened in case of an eventuality.
Further, the amount payable to the master policyholder shall not be more than the outstanding loan balance of the Member of Group Insurance.
The life insurers will also be required to give details to beneficiaries about claim settled and remittances to master policyholder.
"Where the entire claim proceeds are adjusted towards outstanding loan balance, a communication shall be directly forwarded by the Life Insurer either to the insured member or beneficiary with complete details of the total amount of claim settled and the amount remitted to the master policyholder towards outstanding loan balance," it added.