Vijay C Roy in chandigarh
In 2014, when Chandigarh-based Amandeep Kaur subscribed to a private insurer’s life insurance policy, she was promised handsome returns by an agent. She was assured around Rs 9 lakh as the maturity amount after five years if she deposited a premium of Rs 98,500 annually for five years (nearly Rs 4,92,500). However, after the end of five years, she was offered Rs 4.76 lakh as maturity amount and was told that the remaining amount would be paid to the nominee after her death. When she subscribed to the policy, she was in her late thirties.
Every year, thousands of customers across the country fall prey to unscrupulous insurance agents. Some informed customers approach the insurance Ombudsman while many cases go unreported. Sample this: Out of 11,850 complaints registered before the Ombudsman office across India (there are 17 offices) last year, the maximum complaints pertained to mis-selling. The other major chunk was related to partial or total repudiation of death claim, according to a report of the Executive Council of Insurers (ECOI).
The ECOI was established under the Insurance Ombudsman Rules 2017 to facilitate the institution of insurance Ombudsman in India. According to MML Verma, secretary general ECOI, a number of life cases connected with mis-selling are generally based on fraud and forgery of signatures of policyholder or life assured on proposal forms. “Also, many times the customer unknowingly signs the proposal form for insurance believing it to be a fixed deposit scheme or one-time payment of single premium,” he says.
According to experts, often there is lack of accountability of the insurer on the agent, representative or the intermediary, and the customer is left alone in the fight for justice against the mis-sale. On the other hand, insurance companies deny complaints of mis-selling, simply because a satisfactory pre-login verification call had been made.
There have been reports of brokers or agents tutoring customers to accept all terms when calls are received. Coming to the rescue of policyholders, the Insurance Regulatory and Development Authority of India (IRDAI) has come out with new guidelines.
Emphasis on transparency
Santosh Agarwal, Chief Business Officer, Life Insurance, Policybazaar.com, says, “With the new guidelines, consumers will now not only be aware of what they are buying, but also get detailed information about what all the product is offering.”
Indraneel Chatterjee, Principal Officer and co-founder, RenewBuy.com, feels it is the right direction for curbing mis-selling. “It has often been seen that customers are not completely clear of the product(s) they are buying. A common format for benefit illustration, a full screen view, suitability questions for identifying the right product are all designed to provide more clarity. The customer would be better armed to deal with any mis-selling tactics.”
Compare and contrast
Sameer Joshi, Chief Agency Officer, Bajaj Allianz Life, says benefit illustrations are being provided to prospective customers even now by all the life insurers. “However, the IRDAI has introduced a new standardised format. This will help prospective customers or policyholders understand various benefits offered by the product and applicable premiums/charges in a simplified manner.”
According to experts, the new guidelines will help prospective customers easily compare the benefits of various life insurers and take an informed decision before purchase, as the template will now get standardised across the industry.
Insurance companies have been given the option of making the changes to policies and start selling them while simultaneously applying to the regulator for approval. They are calling it ‘Use and File’. According to the IRDAI, the new policies need to be more customer-centric. The rules are aimed at curbing mis-selling.
According to top industry sources, around 75-80 life insurance products would go off the shelf after November 30. Around to LIC officials, more than two dozen policies of LIC are likely to go off-shelf in a phased manner with four of them by November 30.
Santosh Agarwal says most of the products will get refilled and there would be no impact on availability.
Pursuant to the new product guidelines, Bajaj Allianz will withdraw and re-launch around 48 of the key products, says Sameer Joshi, adding “We will also modify a few products by November 30.”
Renewbuy is of the view that it is highly unlikely that any customer-centric product would go off the shelf. Almost all products which have a reasonable off-take have been re-filed with the IRDAI. The re-filing process has also been simplified to ensure speedy resolution. After the necessary revisions, the policies will be relaunched under the same or different names.
Impact on premium
According to industry sources, there will be no change in the premium of the new or existing policies. The guidelines would make it simpler for the customer to understand the product at the time of sale. This would not lead to any systemic increase in premiums of new or existing policies, since premiums are decided on various factors, including estimated risk, health, age, etc. However, a senior LIC official said there could be a slight increase in premium.
Training to help customers
By laying emphasis on training of sales representatives, the regulator is ensuring that sales representatives are able to map the products to customer needs, thereby enhancing the value of the product sold and at the same time delivering value to customers in terms of planning life goals. Further, having the final benefit illustration mailed to the proposer and before paying premiums for online sales will help curb the chances of mis-selling.
Dos & Don’ts to consider before buying a policy
- Buy a policy only from a registered insurer or through his authorised intermediary.
- Evaluate if the agent is advising you dispassionately.
- Fill the proposal form yourself and give complete and factual information; False or misleading information could lead to disputes at the time of a claim.
- Do not sign a blank proposal form or leave any portion unanswered.
- If you are not filling it up yourself, ensure that the contents are fully explained to you.
- Cross check what is covered and what is not.
- Do not sign a blank proposal form or leave any portion unanswered.
- Do not conceal relevant information or make any misstatement as it may lead to disputes at the time of a claim.
New guidelines of regulatory authority
Insurers to mandatorily issue benefit illustrations (for policies with variable returns, for example ULIP) based on two assumed rates of return as per the format and get these signed by the policyholder and the agent or insurer.
Insurance companies have to comply with directions by December 1. The IRDAI had earlier too asked insurers to provide benefit illustrations but there was no deadline set.
There should be a warning-like advisory about the non-guaranteed portion of the returns.
Insurers must show the projected rate of return in their traditional products (non-linked) as well as unit-linked plan benefit illustrations.
In case of digital sales, all terms and conditions have to be displayed on the main screen instead of being hidden behind hyperlinks.
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