Regulator puts in place new guidelines for servicing orphan policies.
IRDA has recently formulated detailed guidelines for orphan policies to help clients. Whenever an agent discontinues his agency or when his services are terminated by the insurer, the policies secured by the agent are left behind unattended and are called ‘orphan policies’.
According to the guidelines, such lapsed orphan policies will be given to an ‘allottee’ agent who has at least two years of experience as an agent in the life insurance sector with the company whose policy has lapsed.
To
make the job easy for the allottee agent, he will be provided with a
list of orphaned life insurance
policyholders along with their addresses. The allottee agent can also suggest
and sell new policies to the customer after reviving the lapsed policy.
Insurers have to specify to the allottee agent that the objective of the allotment is the conservation/revival and further servicing of the policies. The agent cannot start fresh business on a life insurance policy with the same client until the expiry of 6 months from the date of surrender of the lapsed orphan life policy.
Life insurers are also supposed to ensure that allottee agents service these policies in the manner in which they would have serviced normal policies.
The rules governing commission to allottee agents are as follows:
· Equivalent to the commission rates mentioned in the respective file.
· Remuneration will be paid only on revival of a lapsed orphan policy after arrears in premiums are paid on or after the date of allotment, and on subsequent renewal premiums paid under the policy.
· No upfront/advance payments to agents are allowed on account of the policy allotments.
· The payment of remuneration shall cease with the exit of an allottee agent by any means and such an allottee agent will not be eligible for any benefits from the insurer.
IRDA has also documented clear guidelines for life insurance companies.
Single premium life insurance policies or life insurance policies on which no further premiums are due for payment (limited premium payment policies after the expiry of premium paying term) are not eligible for allotment under these guidelines.
If the allotted lapsed orphan policy is not revived/reinstated within 6 months from the date of such allotment, life insurers will have the discretion to undo the allotment by issuing a formal notice to the allottee agent and re-allot to any other agent.
Insurers shall also take into account the track record of the agent and complaints registered against an agent while allotting the orphan policies. They also have to put in place a board that would approve lapsed policies for allotment.
Before allotting policies, life insurers have to take an
undertaking from the agents regarding their willingness for the proposed
allotment and their consent for servicing the policy.