Very often insurance policies are being mis-sold to policyholders by giving false promises. In fact the insurance agents many a times put their personal interests on the forefront and push only particular insurance policies which fill in their own pockets. For instance, group insurance policies where the main benefit to the group of policyholders is low premium, the insurers instead approach each individual policyholder of the group and sell them the insurance policy separately, thus resulting in higher insurance premium for the policyholder. Furthermore, in some cases insurance premiums are deducted without the consent of the policyholder.

Hence concerned over the anomalies in selling insurance products, the Insurance Regulatory and Development Authority is planning to revamp product designing practices in the life insurance industry to protect consumer interest. The Chairman of IRDA, Mr J Hari Narayan manifested his anguish over the various irregularities to the insurers and at the same time made it clear that the regulator will ensure orderly growth of the industry by introducing comprehensive guidelines on the subject. Some of the changes proposed by the IRDA are:
 

• Group policies will not be allowed under the 'bancassurance' route
   
• ULIPS should disclose the maximum possible loss
   
• Any product for which interest rate is declared at the end of the year should be treated as a 'par products', i.e. participating products under which the policyholders are entitled to a share in the profits or surplus of the company during the tenure of the policy. In such products, 90% of the profits are to be credited to the policyholders' account
   
• All polices should have regular payment options
   
• Policies with single or limited payment period should be issued only under special categories
   
• Sales of highest NAV-guaranteed products should be restricted
   
• NAV-guaranteed products should maintain a minimum equity component for a specified period of time and also advised that the sale of these products should be restricted to a multi-pay platform.
   
• Minimum death cover as a multiple of premiums paid throughout the term of the policy
   

Impact of such an initiative on policyholders…
If the above proposals are implemented, the policyholders will benefit as the insurance policies will be structured or packaged in manner which is in the best interests of the policyholders. Also, mis-selling will be curbed to a greater extent if the above changes take effect. Moreover, complex and structure products which are not in the interests of the policyholder will be restricted or curbed thus ultimately benefitting the policyholders.

 

Our view:

We believe that the measures taken up by the IRDA will go a long way in benefiting the policyholders if implemented. This time the IRDA has brought to shore various important aspects of the insurance industry to be revamped, thus bringing about a gamut of changes which will not only benefit the policyholders by keeping the products simple but will also help in orderly growth of the insurance industry.

Apart from this, the insurance agent community should also undergo training and development through which they are able to sell an insurance product considering the need of the insured rather than being self-centric and promoting only those insurance products which yield them higher commissions.

 

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sonya@typsygypsys.com Mar 24, 2012 Good morning. Sandie and I have been with Penn Treaty for 15 years and are very dspaipointed in the situation they are in. However, in our constant contact regarding status we were informed that as long as we continue to pay our premiums and if they do go insolvent, the insurance pool will have up to $300,000 for each of us in the LTC coverage pool. Also, Sandie had to go into rehab a second time this year and I had to pay the $125 per day for 15 days, which is our co-pay for CIGNA, because she had used up her allocated 20 days earlier this year. We submitted reimbursement from Penn and it took us a while to get the money, but they came thru. So, if you know how the system works it isn't so bad.

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