In its latest circular on policyholder protection, the insurance regulator has given detailed guidelines for insurers on fairer and quicker customer servicing. Let us see how these measures will impact the relationship between insurers and their customers.
The Turnaround Time (TAT) for most essential services has been reduced by 50%. For example, the insurers must complete the payment process related to partial withdrawals and surrenders, within seven days of registering requests for these. The death claims that do not require investigations must be settled in 15 days. For early claims, the insurers have been allowed a maximum of 45 days to pay claims.
The provisions of the IRDAI circular are intended to provide policyholders with faster and more transparent services. The decision to surrender insurance policies is not always because of the need for urgent money. Many agents are successful in convincing the customers that the existing policy is not going to be of much use to them and that they should go for a more useful policy that is available in the market (and usually at a higher premium).
Many agents survive in the industry following such “churning” practices. However, insurers try to convince the customers not to surrender an existing policy as that would result in financial loss. Some insurers conduct exit interviews of customers intending to surrender policies, to help them make more informed decisions. Now, there will hardly be any opportunity for insurers to discuss the matter in a friendly environment, as the payments of surrender values will have to be made in seven days, failing with there can be punitive action from the industry regulator.
Customer benefits
Policyholders should check the policy conditions and customer benefit illustrations at the beginning itself, to see whether they are comfortable with them. As the free look period is now 30 days against 15 days earlier, the policyholders have ample time to study the policy conditions. Once they are sure that the products purchased by them are suitable for their needs, they should never surrender the policies on the advice of the intermediaries.
Completing an investigation within 45 days can be an onerous job. The insurance executives who are entrusted with the investigation jobs sometimes find it extremely difficult to get cooperation from specialist doctors and reputed hospitals and nursing homes. Even in the cases of fraudulent claims, collecting pieces of evidence of adverse medical history becomes a time-consuming job. In many cases, insurers have to settle such claims. This affects the interest of customers who have not suppressed any material facts while buying the policies. As claim costs go up, premiums are bound to increase for all.
The writer is an insurance industry analyst