To curb the mis-selling of insurance products and help consumers choose policies based on their needs, the insurance regulator has come up with draft norms on protection of policyholders’ interests.
The Insurance Regulatory and Development Authority (Irda) will make it mandatory for insurers to place all product information in the public domain. It has also said that companies will have to clearly define the conditions, along with products’ benefits and riders. These regulations, which will apply to life, non-life and standalone health insurers once notified in the official gazette, are in addition to any other regulations notified by the regulator.
“Prospects generally depend on the information, advice and guidance provided by the insurer, insurance agent and insurance intermediary in the purchase of insurance products. The insurer, insurance agents or the insurance intermediary shall provide a product prospectus to the prospect containing all material information in respect of a proposed insurance product to enable the prospect to decide on the best cover that would be in his or her interest,” says the Irda’s draft Protection of Policyholders’ Interests Regulations.
For each life insurance product, the insurer will have to clearly mention if it comes with or without profits, and the riders will have to clearly mention the benefits. “The prospectus of any insurance product shall clearly state the scope of benefits, the extent of insurance cover and in an explicit manner explain the warranties, exceptions and conditions of the insurance cover,” the draft regulations underline. They further state that every insurer will have to put in the public domain details of product offered as filed and approved by the regulator.
All life covers will have to clearly state the name of the plan, its terms and conditions, whether it is a participating or non-participating product and the basis of participation in profits, such as cash bonus, deferred bonus, simple or compound reversionary bonus. The policy will also have to mention the benefits payable and the contingencies upon which these become payable, details of the riders and the periodicity of the premiums payable.
The draft regulations say that the products offered must suit policyholders with respect to their income, personal and family circumstances, life stage, financial goals and risk appetite. They also state that the name and address of the agent/insurance intermediary should be mentioned in the policy document and premium receipts or in any such communication. The riders attached to a life cover will have to bear the nature and character of the main policy, such as participating or non-participating and, accordingly, the life insurer will have to make the necessary provisions in its books.
The draft guidelines state that if a sale is executed over distance-marketing modes such as the internet, SMS, mobile phone or other interactive electronic mediums, it will have to be undertaken by an authorised and qualified salesperson holding a valid licence. The insurer needs to ensure that life, general and health insurance agents and intermediaries sell only insurance products, including combi-products approved by the regulator.
The proposal for grant of insurance — life, non-life or health — must be kept in the written format. If a proposal form is not used, the insurer will record the information obtained orally or in writing and confirm it with the proposer within 15 days . Every policy will have to mention the 15-day freelook period, during which the policyholder can review the cover and return it stating the reasons. If the policy is returned during the freelook period, the insurer will deduct mortality charges for all linked products and repurchase the units at the price on the date of cancellation of the policy.
Moreover, as per the draft norms, insurers will have to formulate an awareness policy to educate customers, constitute a policyholder protection committee ensuring its proper functioning as well as create a grievance redressal policy. As far as claims are concerned, upon receiving the documents, the insurer will process the claim without any delay.
Claims against life covers will have to be paid or disputed, along with all the relevant reasons, within 30 days from the date of receipt of all relevant papers and clarifications. If the insurer feels that the circumstances of the claim need investigation, it will initiate and complete such investigation within 60 days from the time of lodging the claim. In cases where the claim is ready for payment but cannot be made due to identification issues of the payee, the life insurer will hold the amount and pay savings bank interest on the amount.
Services like recording a change of address, doing a new nomination or changing one, processing documents and disbursing loan against a policy will have to be done by insurers within 10 days of the receipt of intimation from the policyholder.
Analysts say the regulations will protect consumers from bogus claims often made by insurance agents or intermediaries.
What the draft guidelines say:
* For each life cover, the insurer will have to clearly mention if it comes with or without profits, and the riders will have to clearly mention the benefits
* All life covers will have to clearly state the name of the plan, its terms, whether it is a participating or non-participating product and the basis of participation in profits
* The policy will also have to mention the benefits payable and the contingencies upon which these become payable
* The draft says the products offered must suit policyholders with respect to their income and personal circumstances
* The draft states that if a sale is executed over distance-marketing modes, it should be undertaken by an authorised and qualified salesperson holding a valid licence