IRDA News: Modification of Guidelines for Individual Agents for Persistency of Life Insurance Policies

Reference is invited to the captioned circular issued by the Authority. The Authority is in receipt of representations from the Industry seeking revisiting of certain provisions of the said circular. Accordingly, keeping in view the objective of ensuring higher levels of persistency of life insurance policies as also conserving the agency force, the Authority issues the following modifications.

 

1.Requirements on Persistency: The Average persistency rate is uniformly set as 50% which is to be reckoned only on number of policies.

2.Policies to be exempted: While arriving at the persistency rate, Policies with ‘Auto Cover’ feature embedded as per File & Use approval may be treated as in force during the said ‘Auto Cover period’. Further all the policy exits by way of death, maturity and in-force surrenders may also be exempted in determining the exposure to persistency calculation.

a.Explanation: ‘Auto Cover Period’ for the purpose of these guidelines is the period during which the policy feature, that continues the life insurance coverage of the life assured for a pre-determined period despite non receipt of renewal premium that is due, becomes operative.  

3.Transfer of Agent from one insurer to another: The request for transfer of insurance agency from one Life Insurance Company to the other shall be considered only if the average persistency rate of the agent is at least 50% on the date of application of such transfer. The Persistency Rate shall be on a pro-rata basis and rounded off to the nearest decimal where the financial year is not covered in full.On effecting the transfer, the average persistency rate of 50% shall be reckoned on the policies sold with the new insurer (transferor).

4.Deferred Commission and Servicing of Orphan Policies: The payment of deferred commission pertaining to the original agent is not allowed to the new agent to whom the servicing of policies is transferred. The payment of 50% of eligible commission to the new agent on the premiums procured by him in respect of such policies transferred shall be strictly in accordance with the provisions of Section 40 (2A) of Insurance Act, 1938.

5.Relatives of the employees of Insurers: For the purpose of the Guidelines under reference, the term relatives is re defined as “spouse, dependent children or dependent step children, whether residing with the employee or not”. This clause is applicable only in respect of agents who are licensed or whose agency is transferred to another insurer on or after 01st July, 2011.

6.Effective Date: The persistency rate requirements will be effective for all agency renewals that are due from 01st July, 2014.

All other provisions of the captioned circular are ‘mutatis mutandis’ applicable as outlined therein.

(G Prabhakara)
Member (Life), IRDA