During the tenure of a life insurance policy, the customer experiences several moments of truth, which must be graced with due empathy. Sadly, the ground reality is far from the desired standards of professional and ethical market conduct.
Life insurance is a sensitive product as it is about securing emotional needs through financial instruments. Besides, the product may remain with the buyer for a very long period, if not for his entire lifetime. Both the insurers and the insured remain stuck to the usually rigid terms and conditions of the policies sold and bought for a very long period, spanning the best period of one’s life. This is, however, not a handicap for either the insurer and the assured. This is simply characteristic of the business of life insurance.
Regulations and sensitiveness
This business, therefore, needs to be managed as well as regulated with a sensitiveness unusual for commercial or financial transactions. Life insurers have to be more discerning about the feelings of the customers and their dependents. More understanding of the policyholders’ emotional drives which leads to completion of a transaction with the insurer or the authorised intermediaries is a fundamental condition for the insurers to execute a deal which consummates with the insured committing to pay premium amount without fail and regularly for as long as 20-35 years. At various milestones during the tenure of the policy, the customer experiences moments of truth, which must be graced with due empathy. Unfortunately, however, the ground reality is far from the desired standards of professional and ethical market conduct. Recently, on September 1, 2017 when India’s largest insurer was celebrating its 61st anniversary, I decided to do a reality check.
The watchman of my residential society had recently lost his elder brother in a road accident. On enquiring, I learnt that the deceased had a life insurance policy of Rs 1,50,000 on his life with accident benefit rider. I was informed that claim for basic sum assured was settled immediately but the rider benefit was not yet settled. The deceased’s children informed me that the agent had taken the post-mortem report and the FIR copy in his custody and had been asking for 50% of the rider sum assured to arrange payment from the insurer. From the insurer’s office there was no initiative to settle the claim as early as possible. They were simply waiting for the documents to reach them instead of being proactive. The fellow was not covered by the Pradhan Mantri Jeevan Jyoti Beena Yojana or by the PM Suraksha Beema Yojana though he had a savings account with a public sector bank. The much celebrated schemes of social security by the government has thus grossly remained short of the stated target. Bankers need to be sensitive to the cause of insurance. Today, unfortunately they are not. Perhaps the government is riding the wrong horse to fulfil its mission.
On the other end of the spectrum, I checked with a person who had signed one proposal for life insurance of Rs 1 lakh with yearly mode of payment in the last week of August this year when an agent motivated him to buy a special product which was on offer for a limited period, August 31 being the last date. On September 10, the agent handed over two first premium receipts, each for sum assured of Rs 1 lakh with mode of payment as quarterly, utilising a little over 50% of the cash given to him and retaining the balance for subsequent quarterly dues, but he doubled the yearly premium liability of the policyholder. The policyholder is not only feeling duped but has vowed to never buy a life insurance policy.
Mis-selling was precisely the reason that forced the regulator to come out with stringent regulations during 2010-12.This period had witnessed significant dip in the productivity of the life insurers in India and it took them four to five years to emerge out of the mess.
New regulations from Irdai
Motivated by the actual market scenario, Irdai once again notified new regulations on protection of policyholders interest in July this year making it mandatory for the companies to adopt board approved policy to protect interest of the policyholders. The regulator has also given the directors a message to meticulously see through the customary presentations by the management team and strictly implement the regulations in letter and spirit to ensure that the policyholders’ interests are genuinely protected while selling as well as while serving the policies.
The regulation calls for making the salesman accountable for his conduct. The companies, therefore, need to learn to be responsive and susceptible to the interests of the insuring public. Sales and sensibility are inseparable ingredients in the business of life insurance.
The author is former ED, LIC & CEO, SUD Life