Irda tightens norms for replacement of life insurance policy

Seeking to safeguard interest of customers, Irda has made it mandatory for agents to provide full details in transparent manner before persuading policyholders to shift to another life insurance firm.
Tightening of replacement norms would help in retaining the life insurance policy.
"To protect the long-term interests of life insurance policyholders and to discourage intermediaries persuading lapsing, surrendering or making paid-up of an existing life insurance policy with the intent of canvassing or soliciting a new life insurance policy on the same life," Irda said in a draft exposure.
The guidelines envisage the full disclosure and transparent information to the policyholder to avoid a possible misrepresentation as to the factual position of financial consequences of replacing an existing life insurance policy, it said.

"It is also envisaged that these guidelines encourage fair market conduct and fair business practices amongst life insurers and insurance intermediaries," it added.
The draft said, "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".

Every insurance intermediary or an individual agent would make every reasonable effort to keep in force the existing life insurance policy, it said.
Replacement, if required, would be subject to certain conditions, including obtaining a written consent from the prospect for replacing existing policies.
Besides, it said, there is 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.

"Notify the existing insurer (old insurer) whose policies are proposed to be replaced along with the particulars of policies and also by enclosing a copy of the consent of the prospect as obtained in 'Annexure - A' 15 days prior to submitting new proposal forms," it said.
Other condition include submission of the proposal form to the insurer (new insurer) replacing the existing life policies contracts after the expiry of 15 days from the date of notifying the insurer (old insurer) whose policies are proposed to be replaced.
For the purpose of execution of these guidelines all life insurers are requested to invariably designate officials involved in the solicitation of insurance business and make them accountable for proper discharge of insurers' obligations laid down, it said.