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.