Insurers need to illustrate benefits clearly from December 1

Insurance Regulatory and Development Authority of India (IRDAI) has issued new rules aimed at preventing mis-selling of insurance products while also increase transparency.

Effective December 1, 2019, it will be mandatory for life insurance companies to clearly describe/ elaborate/ state all the benefits of the insurance product in the policy document.

Accordingly, returns guaranteed in non-liquid products will have to be clearly disclosed in the policy document. Not just that, the policy document will have to give minimum return projections that can be expected as well as the final amount that any buyer (of the insurance product) will get in case of maximum returns from the product.

Anil Kumar Singh, chief actuarial officer, Aditya Birla Life Insurance, said the new rules by IRDAI will stop mis-selling while also ensuring that the policyholders are provided with all the correct/ authentic information related to the product. "Implementing this may pose some challenges for the insurance companies in the short-term. However, the move will prove very beneficial for the sector in the long run," he said.

Various factors are required to be considered while arriving at the final number as far as returns for linked products is concerned. However, as per the statutory body, it is now mandatory to disclose the amount a policyholder will get based on 4% and 8% return calculations during a specified timeframe of the policy. The primary objective behind giving out the projections, as per Irdai, is that the policyholder should know how much will get invested and what are the returns like against it, at the time of buying the policy.

Insurance products linked with the stock market tend to be risky making policyholders regret their decision at a later stage. However, not every insurance agent/ advisor will now be able to sell unit-linked insurance plans (ULIPs). These products can be sold only after special training from the insurance company that will have to be compulsorily provided every year.

The policy document will have to clearly describe, in bold letters, all the details and benefits related to the product. The insurance company will be required to get the document signed/ acknowledged by the policyholder and seek his/her consent while also stating that s/he has been informed/ explained about all returns related information about the product being sold.

In the case of policies sold online, all the information will have to be disclosed on the main page. Providing hyperlinks for giving out detailed information will not be acceptable anymore. Additionally, it will be mandatory to share detailed information with the policyholder on his/her registered email address.

Source: DNA