IRDAI has proposed life insurance companies to charge up to Rs.100 to change or cancel nomination in offline policies and up to Rs.50 to carry out such services in online policies.
IRDAI has proposed to introduce administration fees to incorporate changes in nomination details of life insurance policies. According to the proposal, life insurance companies can charge fees from policyholders for registering cancellation or change of nomination in a life insurance policy.
Life insurance companies can charge up to Rs.100 to change or cancel nomination in offline policies and up to Rs.50 to carry out such services in online policies. However, the discretion of charging fees to carry out such services has been left to insurers. Insurers are required to issue written acknowledgment to policyholders after executing such requests.
Currently, the insurance companies are not allowed to charge fees to incorporate such changes. However, there is a provision in the newly enacted Insurance Laws (Amendment) Bill 2014 which allowed insurance companies to charge fees for registering a cancellation or change of nomination subject to regulatory approval.
In an exposure draft, IRDAI said, “The provisions of Section 39(3) referred herein envisage that every life insurer shall furnish a written acknowledgement of having registered a nomination or a cancellation or change thereof and may charge such fee as may be specified by Regulations for registering such cancellation or change. Therefore, there shall be no fee for registering a nomination and for furnishing a written acknowledgment thereon. However, for registering a cancellation or change of nomination as envisaged in these provisions, the fee that may be collected shall be subject to these regulatory provisions.”
IRDAI further said that the financial implication on policyholders to incur such fees is not significant. “With regards to the financial implications on the policyholders, it is clarified that the life insurers will not levy any separate fee for recording the nomination and the fee that is collected by the life insurers for effecting the cancellation or change of nomination shall be considered as a fee for the services obtained, hence, is not to be considered as an additional financial burden,” said IRDAI.
Currently, there is only one form available with the life insurers for change in nomination. A Mumbai based financial advisor is of the view that insurance company can tweak the law to charge fees twice i.e. one for registering a cancellation and subsequently for change in nomination.
IRDAI has sought feedback from stake holders before February 2 in this regard.