Back on Track

Written by Saikat Neogi | Updated: Jun 19 2012, 06:03am hrs
After much deliberations, the Insurance Regulatory and Development Authority (Irda) has come out with final guidelines on orphan policies. From now, if your insurance agent resigns from the company, the insurer will have to find a replacement immediately to service you and ensure that you dont have any trouble in continuing the policy. Only an orphaned life insurance policy that is in a lapsed condition on the date of allotment is eligible for allotment.

Detailed guidelines issued by the insurance regulator says that single premium life insurance policies or life insurance policies on which no further premiums are due for payment are not covered under these guidelines. Also life insurance products designed with specific marketing features like direct or online marketing where no commission outgo is projected under respective file and use are also not eligible for allotment. A lapsed life insurance policy will be one on which premium remains unpaid even six months after the due date.

To continue the orphaned life insurance policies, the insurer will have to notify particulars of allottee agents to the policyholders. The insurer will have to ensure that the allottee agent is an individual insurance agent who has completed at least two years of service as an insurance agent and is on the rolls of the life insurance company to whom the orphan, lapsed life insurance policies are allotted for the purpose of conservation and rendering policy services. The insurer will also take into account the track record of the agent and complaints registered against the agent while allotting the orphan policies.

The insurance company will have to provide to the allottee agent a list of the allotted life insurance policies along with the address of the policyholder for servicing.

However, there will be no bar on an allottee agent canvassing new policies to the policyholder after reviving the lapsed policies. In case of surrender of an allotted policy after allotment, but before revival or reinstatement, no new business shall be accepted by the life insurer from the same allottee agent on the life of the same policyholder until the expiry of six months from the date of surrender of the orphan lapsed life policy, says the Irda note.

Analysts say the new guidelines will help improve the persistency of life insurance policies, which have been falling after the new guidelines on unit-linked insurance policies came into force from September 2010. Even in the past, the insurance regulator has come out with new guidelines on the training and certification of agents. To ensure that only serious professional players come into the insurance business, the Irda has mandated that only entities registered as company under the Companies Act and society and trusts registered under Societies Registration Act shall be eligible to apply for accreditation as agents training institutes (ATIs). The accredition will be given on need basis and the existing private ATIs will be granted a one-time permission as assessed by the Standing Committee constituted by the regulator. The existing ATIs will also be eligible for reallocation of the centres within the state based on the assessments made by the standing committee.

The training institutes will teach from the books prescribed by the insurance regulator. The regulator has mandated that for the part-time batches, the training can be imparted four hours daily for a duration of 14 days and, in case of composite training, the duration will be for 11 and 22 days, respectively, for full-time and part-time training. For a candidate to qualify for the exam, he will have to complete 50 hours. For renewal of licence, a candidate must attend 25 hours training in life and non-life separately.

For remuneration to the allottee agent for servicing the orphaned policy, the guidelines underline that they will have to paid equivalent to the commission rates mentioned in the respective File & Use. The remuneration is payable only on revival of a lapsed orphan policy on account of arrears premiums received on or after the date of allotment and also on subsequent renewal premiums paid under the policy. No up front or advance payments to agents are allowed on account of the policy allotments, say the new guidelines.

The note also says that the policies that are allotted for servicing shall not be counted for persistency of the allottee agent and the total number of policies allotted to an agent shall not exceed 20% of the total number of policies that were introduced by him and in force as on the date of allotment.

Also, where the lapsed orphan policy allotted is not revived or reinstated within six months from the date of such allotment, life insurers will have the discretion to undo the allotment by issuing a formal notice to the allottee agent and reallocated to any other agent as per the norms.