The insurance regulator IRDA
is considering a suggestion that renewal cheques should be made in
favour of specific policy numbers. This follows a disturbing rise in the
number of case of cheating and forgery in the insurance sector.
Unscrupulous representatives collect renewal payments but use the
cheques to sell fresh policies to unsuspecting customers.
This is possible because most premium renewal cheques do not specify
the policy number. The guidelines are a bit fuzzy in this regard.
Insurers accept cheques made out to a specific policy number but don't
refuse those that are simply in favour of the company. Some life insurance companies
advise policyholders to specify the policy number on the cheque while
others don't. "The suggestion is under critical examination. (Such a
rule) would certainly help in combating rise of cases relating to
cheating and forgery," says Irda Chairman J. Hari Narayan.
One reason why brokers are resorting to such desperate measures is the degrowth in the insurance sector. After several years of rapid growth on the back of frenetic Ulip sales, the first year insurance premium collections declined 9.2% in 2011-12. In the first half of 2012-13, new insurance sales are down 3.5% over the same period of the previous year.
While buyers are saddled with unwanted policies, insurance companies are facing a tide of disgruntled customers. For an insurance company, any new business that comes at the expense of an existing policy makes no sense. "Such malpractices will in the long run affect the health and overall profitability of the insurance business," warns Metilda Stanley, senior vice-president, Operations, HDFC Life.
On their part, insurance companies are also trying to prevent such frauds. "We shall soon implement a system, very similar to credit cards, whereby the policy number will have to be mentioned on the renewal premium cheque," says Yateesh Srivastava, chief marketing officer, Aegon Religare Life Insurance. They are also trying to educate customers on how they can avoid frauds. "Always make the cheque stating your policy number. If you are buying a new policy, mention your name, telephone number, email id and the name of the policy opted for on the back of the cheque," says Suresh Agarwal, executive vice-president and head, Individual Distribution and Strategic Initiatives, Kotak Life Insurance.
Such incidents bring into focus the welcome calls that companies make to customers after the sale. These calls can be an important curb against mis-selling and frauds. "If a customer has not paid premium for an existing policy but has bought a new one, the welcome caller will bring this to his notice," says Pawan Mahajan, head of customer care, Bajaj Allianz Life Insurance. The customer has 15 days to return the policy and get full refund of his money. HDFC Life has on its own extended the 15-day deadline to 30 days for its customers.
One reason why brokers are resorting to such desperate measures is the degrowth in the insurance sector. After several years of rapid growth on the back of frenetic Ulip sales, the first year insurance premium collections declined 9.2% in 2011-12. In the first half of 2012-13, new insurance sales are down 3.5% over the same period of the previous year.
While buyers are saddled with unwanted policies, insurance companies are facing a tide of disgruntled customers. For an insurance company, any new business that comes at the expense of an existing policy makes no sense. "Such malpractices will in the long run affect the health and overall profitability of the insurance business," warns Metilda Stanley, senior vice-president, Operations, HDFC Life.
On their part, insurance companies are also trying to prevent such frauds. "We shall soon implement a system, very similar to credit cards, whereby the policy number will have to be mentioned on the renewal premium cheque," says Yateesh Srivastava, chief marketing officer, Aegon Religare Life Insurance. They are also trying to educate customers on how they can avoid frauds. "Always make the cheque stating your policy number. If you are buying a new policy, mention your name, telephone number, email id and the name of the policy opted for on the back of the cheque," says Suresh Agarwal, executive vice-president and head, Individual Distribution and Strategic Initiatives, Kotak Life Insurance.
Such incidents bring into focus the welcome calls that companies make to customers after the sale. These calls can be an important curb against mis-selling and frauds. "If a customer has not paid premium for an existing policy but has bought a new one, the welcome caller will bring this to his notice," says Pawan Mahajan, head of customer care, Bajaj Allianz Life Insurance. The customer has 15 days to return the policy and get full refund of his money. HDFC Life has on its own extended the 15-day deadline to 30 days for its customers.
