Observing policyholders’ right to effect changes in nomination, sectoral regulator IRDA is proposing to do away with the practice of charging fee for such alterations by life insurance companies.
The Insurance Regulatory and Development Authority of India in a draft on ‘Fee for Registering Cancellation or Change of Nomination by the Holder of a Policy of Life Insurance’, has invited comments from stakeholders by February 2, 2015.
“On a comprehensive review…it may be observed that the holder of a policy of life insurance has a right for effecting a nomination and for registering such nomination for the first time be it at the time of effecting the policy of life insurance or at a later time, no fee shall be charged by the life insurers,” said the exposure draft.
Presently, life insurance companies have to give a written acknowledgement about registering a nomination or a cancellation or change thereof and are allowed to charge fee for registering such cancellation or change.
The exposure draft also proposes for no registration fee for a nomination and furnishing a written acknowledgement.
Further, it said registration changes or cancellation of nomination may vary for policies kept in electronic format and there is need to treat these kind of policies differently in terms of levy of fee.
“…registering the nomination or cancellation or change of nomination shall be regarded as important policy holder services.
“As such nomination helps even the life insurers to seamlessly discharge their liability in the event of happening of the contingent event covered under a policy of life insurance,” it said.
The exposure draft has also proposed to fix the upper limit of fee allowed to be collected by life insurers subject to which life insurers will have the flexibility to decide in levying any lower amount.
On the cost-benefit front, it said that there are no significant financial implications on insurers for effecting such changes.
“…it is expected that the number of policies where a cancellation or the change of nomination is effected would be significantly less, therefore the financial implications of charging the fee for change or cancellation of nomination to the policyholder are also not significant,” it added.