There are a number of renewal methods that can be incorporated in policy conditions such as
(i) Non-cancelable renewals – renewals assured and without – any changes.
(ii) Guaranteed renewals – changes not usually made in the terms of the policy but premium rates can be varied based on underwriting results.
(iii) Non-renewable for stated reasons such as on reaching a specified age.
(iv) Optionally renewable, that is, subject to re-evaluation of risk by the insurer which can include review of premium and modification of the terms and conditions.
Many insurance products such as health insurance, are matters relating to the life and dignity of human beings, and hence renewals need to be handled with great sensitivity. Courts can take an adverse view of practices that appear detrimental to the protection of the consumer.
Weighty reasons, such as those based on grounds of fraud or misrepresentation and not merely on the basis of random individualised claim experiences, may need to be cited in case of a legal dispute.
Regulations have also come into force in same countries where refusal of renewal is regulated. Renewal is normally deemed to constitute a fresh contract and the duty of utmost good faith is revived, although in man insurances, a fresh proposal form is not required to be completed by the insured. Renewal, of course, is affected. Under certain types of insurances, adjustment of premium has to be made at renewal.
For example, under money-in-transit insurance, the premium is calculated on basis of the actual amount of money in transit during the period of insurance and if premium so calculated differs from the provisional premium, and premium is collected or refund made, as the case may be. Similar practice is also followed in Fire and Marine declaration policies and Workmen’s Compensation insurance.
Insurers have to formulate their reinsurance programme in advance for the new financial year and file it with Insurance Regulatory and Development Authority (IRDA). Within the broad framework of the Reinsurance programme, the insurer operates its day to day reinsurance activities subject to payment of premium.
A fresh policy is issued specifying the terms and conditions of the further period insurance. The step by step procedure described above is based on manual operations. With the use of IT applications, the process is made automatic based on software design for the purpose.
Courtesy: General Insurance Underwriting book by Sashi Publications
