IRDAI chairman T.S. Vijayan expressed concern over the practice in which insurance companies convert a single premium policy into a regular premium policy. He was speaking at FICCI’s 17th Annual Insurance Conference called ‘FINCON2016’ held in Mumbai today.
Vijayan urged insurers to avoid the practice of converting insurance policies having tenure of five years or less into regular premium policies. “Insurance companies should offer single premium policies where there is a scope. This will help create happy customers and give better experience to them, he added.
Typically, single premium policies are cheaper than regular premium policies as premium and commission structure of the former are very low. The single premium policies offer commission of only 2% whereas regular polices pay up to 40% and up to 7.50% in the first and second year respectively.
In 2014, IRDAI had found that SBI Life had allegedly collected second year premium upfront along with the first year premium from the beneficiaries of a policy called Dhanaraksha Plus Limited Premium Paying Term (DPLPPT) which is against the File and Use norms.
Though the company offered single premium policy of DPLPPT, it sold regular policy and collected premium more on the lines of a single premium rather than two yearly regular premium. The regulator had asked SBI Life to refund Rs.275 crore to the beneficiaries of the policy. Also, the insurance regulator has asked SBI Life to distribute the excess commission paid to its corporate agents under the scheme to the beneficiaries of DPLPPT. However, the matter is sub-judice.