THE ROAD AHEAD FOR THE LIFE INSURANCE INDUSTRY
Insurance Sector underwent a lot of sea-changes, when it was privatized in 1999 and the Insurance Regulatory & Development Authority of India- IRDAI- came into being. Now one more revolutionary change is sweeping across the Sector once again with the passing of the Insurance Act 2015 by the Government of India.
This change has raised the expectations of the customers manifold in the following portfolios:
- More innovative products
- Cheaper & affordable plans
- More improved customer service standards
- An end to the mis-selling of policies by the intermediaries
- Insurers becoming more responsible for the acts of omission and commission by their representatives
- More penetration into Rural & Social Sectors
- Penalty for the insurers for the non-compliance of the Investment Regulations
- Some relief from the stringent provisions of the Section 45 of the Insurance Act 1938 under which the insurers were rejecting death claims of the policies without proper justification
- Customers becoming co-partners in the running of the insurance companies by their participation in the Boards of the insurers, etc etc.
- Protecting the interests of the policyholders
- Establishing the guidelines for the operation of the insurers as well as the Brokers
- Specifying the Code of Conduct, qualifications and training for the insurance intermediaries
- Promoting efficiency in the conduct of the insurance business
- Regulating the investment of funds by the insurance companies
- Specifying the business to be done by insurers in the Rural & Social Sectors
- Handling disputes between insurers and intermediaries
- Taking care of the customers’ grievances, both directly and indirectly
- Insisting on the Required Solvency Margins- RSM-for the insurers so that the interests of the customers are well protected from the dangers of any financial insolvency by any insurer
- Protecting the interests of the policyholders in case of any take over of an insurer by another insurance company by careful and proper valuation and then only permitting it and seeing to it that the outgoing existing customers are taken care of well by adequate servicing arrangements and
- Ensuring that the leadership of each insurance company is in safe hands by helping in the selection of a suitable and fit candidate as its CEO.
- 10 days’ time for complying to the majority of the requests of the customers like the Change of Address, nomination/ assignment, revival of the policy, loan to be sanctioned, issuance of a duplicate policy, placing any endorsement on the policy etc.
- 15 days’ time for the settlement of any maturity claim of a policy, after receipt of all the necessary requirements
- 30 days’ time for the settlement of a non-early death claim after the receipt of all the requirements
- 60 days’ time if it is an early death claim
- Six months’ time if any investigation is caused into the early death claim.
- Free-look period of 15 days allowed for a customer to return the policy document and claim refund of the premium, if the policyholder is not satisfied with the conditions of the policy is a great revolutionary step taken by the IRDAI.
- Why there should be a condition of a minimum 3 years’ premium payment before the policy attains the Paid-up value or the Special Surrender value? This is very harsh as the customer loses all the hard-earned money paid, if for any unavoidable financial or other reason, stops paying the premium before the end of 3 years. Especially if it is a large policy, the premium will be considerable. It should be a case of simple refund of all premiums paid, deducting the expenses like the commission paid to the agent, incentives given to the Development Officer, medical fees paid to the Doctor, policy preparation charges including the stamp duty and the premium charged for the risk coverage.
- The Guaranteed Surrender value under a policy is presently 30% of all premiums paid, excluding the first year’s. This is very harsh- it should be at least 80% of all premiums paid by the policyholder.
- The new Insurance Act 2015 has mandated that all the death claims arising after 3 years of taking the policy should not be repudiated but paid. This rule should be followed in letter and spirit. Even when death takes place within a period of 3 years of taking the policy, although the insurer has the right to do all vigilance check, investigation etc, they should be done without harassing the hapless claimant. No doubt, there is always a chance of a Planned Fraud by certain unscrupulous policyholders, in collusion with the agents/ staff/ Development Officers/ medical examiners etc by claiming the sum assured at the end of 3 years in order to avoid the Rejection of the claim by the insurer. Well, the hand of the Law is always longer to nab such culprits but we can’t penalize all innocent policyholders just because there are a few anti-social elements in the society.
- Even within the 3 years of taking the policy, if death takes place, the investigation should be ordered only for big amounts and not for petty amounts. IRDAI may fix the ceiling of Rs 5 lacs or more for such investigations and not for the lower amounts.
- IRDAI Life Member Mr NB Sathe has mentioned that the Regulator will study the pattern of death claims after 3 years of taking the policies for certain time limit of 3/5 years and then decide to approach the Government for any modification in the death claims settlement rule, if any undesirable trends are noticed.
- The insurer should bear the cost of the Service Tax, imposed by the Government of India, instead of levying it on the policyholders, as done hitherto.
- IRDAI has recommended the waiver of Service Tax for the insurance premium on the lines of incentives granted to the National Pension Scheme contribution up to Rs 50000 each year.
- Similarly IRDAI has suggested for the removal of income tax on the maturity value & bonus of life insurance policies, quoting the bank rule of levying income tax on the interest only earned by the customers beyond Rs 10000 every year and not levying income tax on the Principle Deposit.
- There should be continuous customer education campaigns organized not only by the IRDAI- now done to a limited extent- but also all the insurance companies.
- There should be regular Consumer Awareness Meets organized by all the insurance companies.
- Although the methods of premium payment have now improved thanks to Technology like the internet, ECS, ATMs etc, the customer should have the facility of ‘Drop Boxes’ in the important locations of the city/ town, where the cheques are collected every day by the insurer and receipts issued promptly.
- There should be regular customer feedbacks through an external agency like the surveys, service score cards, post-policy questionnaires etc and the Regulator should do surprise checks of them in order to improve the customer service.
- IRDAI may arrange customer meets of all the insurance companies in major towns and also in the rural areas. The invitees for this meet should be randomly selected- not like the present customer meets where the policyholders are tutored and brought. Then only there will be real feedback.
- IRDAI may insist on proper discipline, punctuality and prompt disposal of the pending papers by the staff of the insurance companies by arranging surprise visits. These will make the employees alert.
- IRDAI has correctly defined the role of Banks in the sale of insurance plans in the sense that Banks are answerable to the complaints of the policyholders as Brokers and not show the hand towards the insurance companies as being done hitherto.
- IRDAI may insist on the superior Quality of Service to be rendered to the customers- Service Quality is defined as “ a measure of how well the service level delivered matches customer expectations . Delivering quality service means confirming to customer expectations on a consistent basis”. This only leads to customer loyalty and customer retention.
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- There should be more concentration on Health Insurance as it is the talk of the day today. This sector has brought in a premium of Rs 20096 crores in 2014-15 compared to the earlier year figure of Rs 17495 crores, thus showing a plus variation of 15%. This sector is going to grow at a steady rate of 18-20% for the next 5 years in view of new products, technology innovations, customer awareness, the increasing cost of hospital treatment, disease burden and regulatory fillip.
- The quality of the distributors at all levels- Agents, Banc Assurance, Corporate Agencies- should be improved across the board in order to win the confidence of the customers. This can be done by select recruitment and better training.
- The insurance companies should invest in human assets- good exposure to employees, timely and regular training, job rotations, overseas programs- these all will lead to less attrition among employees & officers.
- The insurance companies should concentrate on Affinity-based channels as Doctors, CAs, RWAs- Resident Welfare Associations- etc to increase their reach. In USA, there are Associations of Retired People- AARP- Soccer & Rugby clubs.
- Prompt and transparent grievance redressal systems in each insurance company are needed for restoring the customers’ faith.
- Just as the insurer wants to have a 360 degree of the customer, the customer too wants to have a full view of the insurer. This comes from the personalized experiences providing value, improved service quality, individual care, reduction of customer stress, increased value for money and customer empowerment.
R.Venugopal is a Retired Executive Director of the LIC & a Retired Professor, National Insurance Academy Pune. He can be contacted at The email address- [email protected], Mobile 09591256773.
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