Buying Life Insurance Policy Just Became Easier Thanks to New IRDAI Rule
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Since the virus outbreak, we have seen a growth spurt in volumes of new life insurance proposals such as term plans. The pandemic has made many aware about how important life insurance is to protect your family from unforeseen events.
However, the socio-economic situation arising in the wake of the COVID-19 outbreak has impacted the traditional manner agents and intermediaries canvas life insurance policies. It has severely affected important processes, such as filling-in of the physical proposal forms, obtaining wet signatures on them, and subsequent movement of such physical papers, etc.
Consequently, many life insurers asked Insurance Regulatory and Development Authority of India (IRDAI) to allow the option of authenticating the proposals for life insurance through electronic means, in place of a physical signature, for the sales made by insurance agents and intermediaries, in addition to the methods presently allowed.
In this backdrop, IRDAI has now allowed insurers (insurance companies) to obtain the customer's consent without requiring wet signature on the hard copy of the proposal form, for the business solicited by insurance agents/intermediaries.
Insurers can now send the completed proposal form to the customer (proposer) on his/her e-mail ID or mobile number in the form of an e-mail or a message with a link. The customer may then give their consent to the proposal (if they wish to) by clicking the confirmation link or by validating the OTP that's been shared.
The insurer will have to maintain verifiable, legally valid evidence of the proposer's consent received for the fully completed proposal form. Further, the insurer cannot accept any payment towards proposal deposit till the receipt of consent of the proposer.
In all such cases, the agent/intermediary will have to confirm that only the approved sales material has been used during the solicitation process. They also have to certify the authenticity of the e-mail ID and/or mobile number of the prospect by conducting de-duplication of such data and other such means.
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Moreover, the insurer will be responsible for ensuring the suitability of the product being purchased. Insurers will also be responsible for carrying out pre-issuance verification calls in respect of all such proposals.
This facility will be allowed on an experimental basis till December 31, 2020, and will be limited to pure risk products such as term plans. Products that involve savings element such as ULIPs will not be covered.
Any grievances pertaining to sales logged through the above-mentioned method will have to be separately maintained by the insurers and a monthly statement will have to be submitted to IRDAI. IRDAI reserves the right to revoke the said facility in respect of any individual insurer or for all insurers any time.
In addition, IRDAI has allowed insurers to issue electronic policies based on the feedback it received from insurers expressing difficulties in printing and dispatch of policy documents amid the pandemic. It also took into account the desirability of adopting digital means of doing business in the interests of policyholders and other stakeholders. The policy document has to be sent to the e-mail id submitted by the proposer.
Life insurer will confirm the receipt of electronic policy document by the policyholder through verification calls or other means, thus preserving the proof so that 'free-look period' can be calculated from that date. Free-look period is the time during which the policyholder can cancel the policy without attracting any penalty.
For policies issued through electronic mode, a thirty-day free-look period will be permitted. Policyholder having a clear intention of cancellation of policy can return the policy document by mail during the free-look period.
For issuance of electronic policy, consent of the policyholder to receive electronic policy bond is required. If a policyholder insists on hard copy, the same has to be issued without any charges.
This facility will be valid for all policies issued during FY 2020-21.
Footnote
The only thing predictable about life is that it is full of uncertainties. Often an untoward event takes place when it is least expected. Life insurance is a vital component of financial planning which helps you safeguard the interest of your dependents from such untoward events.
It is important to be optimally covered for life insurance to protect the financial interest of your loved ones. You can determine the optimal life cover amount by taking into account factors such as:
✓ Life expectancy
✓ Number of dependents
✓ Monthly household expenses
✓ Total assets
✓ Outstanding loans
✓ Contingency reserves
✓ Inflation growth
[Read: How To Insure Life Optimally]
Once you've determined the optimal insurance coverage, choose an appropriate life insurance product that matches your needs. There are a number of insurance products available in the market today, from term plans to ULIPs to endowment plans, money-back policies, and so on.
Ideally, life insurance and investment needs should not be mixed. For optimum financial security at low premium, a pure-life term insurance plan would be your best option.
Additionally, it is important to conduct a background check of the insurer by assessing the following:
✓ Number of years the company has been in existence
✓ Claim settlement ratio
✓ Solvency ratio
✓ Profitability ratio
Moreover, before signing policy documents carefully go through the fine prints and clear any ambiguities and/or doubts.
Warm Regards,
Divya Grover
Research Analyst
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