Insurance Regulatory and Development Authority (IRDA) Regulation for Policyholders Protection.
A policyholder is an individual who buy a life insurance product. People buy the policies with the faith that the regulatory system will provide the environment of trust.
The risks in this area can be identified as:
- The solvency of the insurer.
- Failure to understand the product.
- Failure of the product to meet its forecast or perceived performance.
Protection of the Policyholders Interest.
At the time of opening up the insurance sector to private players, IRDA had issued guidelines on policy holder protection and also set up a committee to protect consumer interest. The Securities and Exchange Board of India (Sebi), which last month sought to bar 14 life insurance companies from selling and renewing Ulips, had also cited investor protection as the primary reason for regulating the risk-cum-investment plans.
The committee headed by D Swarup had noted that the commission structure was responsible for mis-selling. In addition, one of the two Public Interest Litigation’s ( PILs) filed in high courts has questioned the claims made by insurance companies and agents that Ulips offer high returns to policyholders. This (IRDA action) is fine-tuning of what has happened so far to form the current infrastructure. A fair amount of steps have already been taken by the insurance regulator,” said Paresh Parasnis, Principal Officer and Executive Director of HDFC Standard Life.
Those related to the stock market, however, see IRDA’s moves on improving policyholder protection as another step to strengthen its position in the turf war with Sebi. Following widespread complaints about lack of transparency, IRDA asked life insurers to disclose the commission and fees that policyholders paid.
The Regulations prescribe Ceiling on Rider Premium/Benefit.
In case of term and group products, the health related rider premium ceiling 100% of premium under the basic products and in other cases 30% of the premium under basic product rider benefit not to exceed the sum assured under the basic policy. In case the rider premium is high as compared to the basic policy premium the maturity benefits might not be considered commensurate with the premium paid.
IRDA Regulations Completion of the Proposal Form.
The proposer shall give all the required information and understand the section 45 of the act very thoroughly and the regulations require the life insurer to prominently state in the proposal form the requirements of Section 45 of the Act. The proposals should proceed with speed and efficiency. The decisions are communicated in writing within a period which should not exceed 15 days from the receipt of the proposal. The transparency should also be maintained.
IRDA Regulations Policy Document Wording.
The policy wordings should be clear and the exclusions should be stated clearly. The regulations includes providing the free look period of 15 days from the date of receipt of the policy document and to invite the attention of the policyholder to this provision.
IRDA Regulations Policy Servicing.
No time frame is provided by various services and there is no mechanism for ensuring the compliance.
IRDA Regulations Claim Settlement.
The primary documents should be stated which are required to be submitted by the claimant. Also the time frame should be stated for various activities. The time period of six months which is allowed for claims investigation is a very long period.
IRDA Regulations Grievances redressal.
There should be a defined mechanism for the grievance redressal of the clients and the information should be communicated to the policyholder. Also transparency should be ,provided in the grievance redressal process.
IRDA Regulation of Investment’s.
- Life business in terms of explanation in Section 27A of the Act in which the authority has determined the assets relating to pension business, annuity business and linked life insurance business shall not form a part of the controlled fund for the purpose of that section.
- Every usurer shall invests and at all times keep invested his fund of the unit linked life insurance business as per pattern of investment offered to and approved by the policy holders.
- Regulations of the Investments general business.
Every insurer carrying on the business of general insurance shall invest and at all times keep invested his total assets in the manner as prescribed.