June 24, 2014
The Indian insurance regulator, seeking to protect consumer interests, has made it mandatory for agents to provide full details in a transparent manner when they attempt to persuade policyholders to shift to another life insurance company.
The Insurance Regulatory and Development Authority (IRDA) said in an exposure draft that “no life insurance agent, insurance intermediary or an insurer is permitted to replace a life insurance policy, except, if it is in the interest of the policyholder”. The move is also to discourage intermediaries from persuading customers into lapsing on or surrendering an existing life insurance policy “with the intent of canvassing or soliciting a new life insurance policy on the same life”.
The guidelines envisage the full disclosure and transparency of information to the policyholder to avoid possible misrepresentation as to the financial consequences of replacing an existing life insurance policy, the Press Trust of India reported, citing IRDA.
“It is also envisaged that these guidelines would encourage fair market conduct and fair business practices amongst life insurers and insurance intermediaries,” the regulator added.
The draft said: “Every insurance intermediary or an individual agent would make every reasonable effort to keep in force the existing life insurance policy.”
Replacement, if required, would be subject to certain conditions, including obtaining written consent from the prospect to replace existing policies. There is also a need to obtain the particulars of all existing life insurance contracts of the prospect, and details of those policies that are proposed to be replaced.
Agents also have to notify the existing insurer whose policies are proposed to be replaced along with the particulars of the policies. The agents also have to enclose a copy of the consent of the prospect 15 days prior to submitting new proposal forms, said IRDA. In addition, they have to submit the proposal form to the new insurer whose policies are to replace existing life policies after the expiry of 15 days from the date of notifying the old insurer.