Indemnity principle doesn’t apply to life insurance since loss is not quantifiable

Published in Livemint. Written by Abhishek Bondia

I have two term policies with sums assured of ₹20 lakh and of ₹30 lakh . They are from two different insurers. I also have a money-back policy of ₹10 lakh. If a claim was to be made, would all the three policies be enforceable?

—Manish Jalan

Yes, they will be enforceable. In the case of life insurance policies, the principle of indemnity does not apply. The indemnity principle means that the policy payout should restore the insured to the same financial position in which he was before the loss happened. Since the value of human life cannot be ascertained, the principle of indemnity does not apply as it is not possible to quantify the loss.

Life insurance policies are fixed benefit policies. When a claim is triggered, the defined sum assured gets paid out irrespective of other existing policies of the insured. Thus, in the case of life insurance, if you have multiple plans, all of them would pay a claim independently to the nominees listed in each policy.

My wife and I are planning to buy a health insurance policy that rewards policyholders for keeping good health. I believe the company monitors health and workouts through wearables. I want to know how such plans work, and how long I need to have the wearable for. Wearables capture a lot of data, so I also want to know if there are any regulations from the Insurance Regulatory Authority of India (Irdai) regarding the use of such data by the insurer.

—Name withheld on request

Health insurance plans which offer rewards for maintaining good health usually have their own mobile apps. When you buy the policy, you are required to download the app, which then tracks your health, the number of steps that you take, your cardiac condition, and so on. Some of this activity could be tracked through wearables as well. If the application records an improvement in health due to your lifestyle, the same is relayed to the insurer, who then offers you related benefits. There are no specific regulations against the use of such data for the insurer. However, this is an area being looked at closely by the regulator. Irdai also recently approved a few proposals under the regulatory sandbox for app-monitored wellness programmes.

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