IRDA has proposed a host of
measures relating to disclosure and selling practices among others to protect policyholder’s
interests.
IRDA
has proposed to tighten norms for selling of insurance policies in order to
check mis-selling.
In a
draft circular, IRDA has asked insurance companies and insurance intermediaries
to strictly adhere to the IRDA advertisement regulation in which it had
restricted use of any misleading information to sell policies.
The insurance
regulator has recommended that the products should be suitable to the policyholders
income, personal and family circumstances, life stage, financial goals and risk
appetite. IRDA said, “When buying an insurance policy, a prospect or proposer
has a right to receive insurance advice consistent with his/her financial
needs, investment objectives, age, and other relevant information, and the
insurance, insurance agent and insurance intermediary shall provide such
insurance advice dispassionately.” Furthermore, IRDA has proposed insurance
intermediaries to clearly illustrate the maturity amount and charges incurred
in the policy like mortality charges and surrender value.
On
online distribution, the regulator has proposed that the insurance intermediaries
can approach online leads only after taking prior consent of the prospect. Also,
the canvassing to be made in such policies should be precisely on the lines of
standard script approved with IRDA.
In
order to improve post sales services, the insurance regulator has proposed
insurers to put name, address and contact details of agents and insurance
intermediaries in the policy documents, notices, premium receipts and any other
communication.
Also,
the regulator has said that insurance intermediaries should make their clients
understand the importance of KYC. “It is the need to comply with the minimal
KYC requirements such as photograph, proposal form, proof of identity and proof
of address. It is mandatory to furnish contact details such as email, phone
number including mobile number and bank details so as to enable the
policyholder to get intimation of benefits under the policy receive the amounts
due expeditiously,” says the draft circular.
Meanwhile,
in order to improve transparency and reduce ambiguity, the insurance regulator
has proposed that insurance companies should clearly mention all the details of
policy such as bonus, riders, premium payable, grace period, switch, surrender
value, mortality charges, revival of lapse policies and terms and conditions on
their websites.
Like Key
Information Document (KID) in mutual funds, IRDA has proposed insurers to issue
Key Feature Document (KFD) along with the policy documents. The KFD will carry
key features of policy in a simple language (jargon-free) and easy to read
fonts.
In
addition, IRDA has proposed that insurers need to clearly disclose the returns
on investment and manner in which it is calculated. Typically, traditional
policies deliver CAGR of 4% to 6%. However, insurance companies usually
calculate returns on sum assured which reflects higher returns on investments.
IRDA
has sought feedback from stakeholders before January 19 in this regard.
Source: Team CafeMutual
