The IRDAI has issued a Master Circular on Life Insurance business in a move towards making life insurance simple, easy to understand and enhancing transparency for a well-informed decision by prospects/policyholders.
The circular was released on 12 June after a comprehensive review and consolidation of an array of provisions covered under four circulars, which now stand repealed.
In a statement, the IRDAI says that with the master circular, “a conducive environment is now facilitated to spur innovation, enhance customer experience and satisfaction. Boards of insurers are now enabled to decide on various business aspects to quickly align their strategies to the changing market requirements. Product governance framework has been strengthened whereby the Product Management Committee of the insurers oversee the product development, pricing and design. Insurers are required to put in place end to end technology solutions to ensure efficient and seamless services through the entire life cycle of an insurance contract. Wider choices and flexibility are to be provided to customers for them o choose products/riders as per their needs.
Key highlights of the Master Circular include:
Simplification and Transparency
Customer Information Sheet (CIS) has been introduced which provides policy-related information in simple and easily understandable language, explaining various policy benefits and terms and conditions so that the policyholders can find a snapshot of the policy in one place. This forms a part of the policy document. This is in addition to the improved Benefit Illustration of products to be made available to a prospect/policyholder.
Additional features/options made available to policyholders
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It is mandatory to offer policy loans in all life insurance savings products enabling policyholders to meet liquidity requirements, if need be
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Health riders covering health related contingencies/emergencies without recourse to surrendering the policies are made possible
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Partial withdrawal under pension products is now allowed enabling policyholders to meet their specific financial needs for important life events like higher education or marriage of children; the purchase/construction of residential house/flat; medical expenses, treatment of critical illness
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In case of surrenders, reasonableness and value for money are to be ensured for both surrendering policyholders and continuing policyholders
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To facilitate financial planning and enhance the flexibility in premium payments, insurers are now permitted to offer products with a range of premium payment terms
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A variety of products and product features are now possible, like
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The free look period which provides time to review the policy terms and conditions is increased to 30 days from 15 days
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Robust systems are to be in place for Grievance Redressal. Complainant to be informed about the mechanism for escalation to Insurance Ombudsman, if the grievance is not redressed satisfactorily. In case the insurer does not appeal against the award decided by the insurance ombudsman and does not implement the same within 30 days, a penalty of INR5,000 ($59.85) per day shall be payable to the complainant.
Measures to strengthen governance
- Mechanisms are to be put in place to improve persistency, curb mis-selling and avoid financial loss to policyholders and also enhance long term benefits for them.
- Periodic training is to be provided to intermediaries, distribution channels and employees of insurers on products (existing and new), policy servicing and changes in regulations, etc.
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Product clearance process is to be simplified; Board constituted Product Management Committee is empowered to deal with governance aspects of product development, pricing and design
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In pricing products, insurers shall ensure
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Premium rates/charges are fair
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Discounts offered & loadings are unambiguous and objectively defined
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Similar risks are not discriminated in terms of premium charged
- Pricing is equitable between policies sold through different channels.
The underlying principles of simplification and transparency in insurance enable a well-informed decision by a prospect/policyholder. It minimises policyholder grievances; enhances customer satisfaction and confidence. It goes a long way to improve insurance penetration while also providing an inclusive, equitable and diversified insurance for all.
Please refer to the full text of the Master Circular on this webpage.