Insurance Regulatory and Development Authority of India (Irdai) has come out with a regulation to protect the interests of policyholders. It is aimed at making the insurers serve their customers more sensibly, transparently and promptly.
Provisions of the regulation
The regulator has said there should be board-approved policy for protection of policyholders’ interest. Important policy conditions like Guaranteed Surrender Value available under a policy, types of bonuses to be declared (simple or compounded reversionary), details of the various revival schemes available, etc., will have to be mentioned by the insurers in the policy document itself. Also, e-mail id of the servicing office of the insurer has to be mentioned in the policy document.
In health insurance products, the regulator insists that all exclusions, general and specific, have to be clearly mentioned in the policy. The pre-existing disease waiting period and specific waiting periods will have to be mentioned there. All details of the TPAs, policy migration facilities and grievance
redressal mechanism have to be mentioned as well. All claims have to be settled within 30 days of receiving the requirements from the claimants.
Beneficial to policyholders
The regulations are very useful for policyholders. Since a lot of important policy conditions and privileges will be clearly written in the policy itself, the operations of the insurers will be more transparent. The regulator, through its recent round of instructions to insurers, has tried to force them to be more customer sensitive. It expects that the regulations will make people more interested in buying insurance products and keep their existing policies in force. After all, the primary concern of the regulator is to ensure that the benefits of insurance reach a larger number of insurable people of this country and that the persistency of the policies improves significantly.
The point is, similar kind of regulations were brought by the regulator in the past as well. Already, a lot of important policy conditions and exclusions are written in the policy documents. Regulators and insurers always advise the policyholders to read the policy conditions thoroughly. There is a cooling period of 15 days from the date of receiving the documents when policyholders have the option to withdraw from the insurance contract, in case they find the terms not suitable.
Ignoring terms & conditions
The fact remains that policyholders hardly go through the text of policy conditions. They prefer to ask the agents to explain the conditions in simple terms. Since these conditions form part of the legal contract, most of the clauses are written in technical language. Many conditions related to non-forfeiture, Guaranteed Surrender Value (GSV), section 45, accident benefit and health insurance are not easily comprehensible.
Even many new agents do not understand these features properly. Even when they understand, they have a fear that they would not be able to close a sale if they explain everything to the customers. So, certain important policy conditions and exclusions remain unknown to the party, no matter how much transparent the insurers are in mentioning all policy conditions in the policy bond.
The road ahead
The only solution is that insurers explain complicated policy conditions in simple terms. They should make it a point to invite policyholders to their offices so that the policy conditions can be explained in layman’s language and any doubts can be cleared at the very beginning. This exercise will go a long way in increasing the confidence of customers in insurance companies.
Most complaints of policyholders are related to mis-selling. Policyholders’ grievances should be patiently heard and servicing related issues should be handled with care. Questions on claims, surrender values, returns must be answered to the satisfaction of the policyholders. Technology has enabled insurers to offer fast and error-free services anytime anywhere. Credibility of insurers will depend on how fast they can resolve complicated issues. That is real policyholders’ protection. No amount of regulation on policyholders’ protection can resolve such issues.
The author is manager (Legal), LIC of India (Asansol Division). The views expressed here are the author’s personal views.