Regulations
Will IRDAI’s advertisements norms reduce insurance mis-selling?
IRDAI has come out with norms for insurance advertisement. While the changes will help improve transparency, ‘buyers beware’ will still apply in insurance buying
 
The Insurance Regulatory and Development Authority of India (IRDAI) has issued fresh norms on insurance advertisements to protect the interests of the insuring public, enhance their level of confidence on the nature of sales material used and encourage fair business practices. As it is very difficult for the public to understand and evaluate the intricacies involved in the various insurance products, it is of paramount importance that the publicity material is relevant, fair and transparent enabling informed decision making about whether or not to buy a specific insurance product. Here are some of the points in the new circular on insurance advertisements and what IRDAI can do beyond just advertisement regulations.
 
1. It has asked companies to ensure that communications are clear, fair and not misleading, whatever be the mode of communication. Insurers have been directed to use material and design (including paper size, color, font type and font size, tone and volume) to present the information legibly and in an accessible manner.
 
2. Where any insurance advertisement highlights the benefit of 'guarantees', a clear disclosure of the underlying conditions under which the guarantee operates must be made, wherever applicable. In all such cases, all the conditions (including cost of guarantee, charges) under which the guarantee operates need a prominent mention. If the underlying conditions are very elaborate, the text/wording on guarantee must be accompanied by the phrase “Conditions Apply” in a font that is at least 50% of the font used to highlight the guarantee.
 
Note: Insurers sell non-participating traditional products which have pre-defined returns with no bonus component. IRDAI should make the insurers specify the product returns in brochure and policy document as it can be easily calculated. Most of these products give returns of 4%-5% pa, but the buyer is not aware of it as the insurers do not specify it anywhere. IRDAI needs to enforce this transparency.
 
3. In respect of Unit Linked Life Insurance Products (ULIPs) the actual asset mix of various underlying funds vis-à-vis the asset composition of approved asset pattern has to be placed on the web portal of respective life insurance companies at least on a half yearly basis.
 
4. “Some companies have products with 0% or 100% (or more) allocation charges under ULIP products. These two situations are special in nature and hence in either case additional information is required in the undertaking to be given by the policyholder to avoid any confusion,” IRDAI said. In the case of products having 0% allocation, the benefit illustration should carry a declaration in capital and bold letters. "I ALSO UNDERSTAND THAT NO PART OF MY FIRST YEAR PREMIUM WILL BE INVESTED IN UNIT LINKED INVESTMENT FUNDS".
 
Note: Such toxic ULIP or ULP (Universal Life Plan) were sold in the past. ULIPs sold before September 2010 and ULPs were axed by IRDAI. If IRDAI believes that some insurer is still selling these toxic products then they need to take action instead of making just disclosures in product advertisement. It is not an advertisement issue, but a matter of grave concern, if such products are still there in the market.
 
5. On phone calls, IRDAI said promotional activities through cold-calls shall be preferably by a licensed intermediary. In case it is done by other than licensed intermediary, responsibility of compliance with advertisement regulations and the related circulars/guidelines vests with the insurer/intermediary that has outsourced this activity.
 
Note: Fraud selling over the phone is a serious issue. In most cases, the calls are from unlicensed entities, who pass on the leads to valid intermediaries to close the sale. IRDAI should make the insurers responsible not just for compliance with advertisement regulations but also by levying penalties for fraud selling of policies via cold-calls.
 
6. The advertisements should not: Highlight the potential benefits of an insurance contract without giving a fair indication of the risks. Draw attention to favourable tax treatment without stating that they are subject to changes in the tax laws.
 
7. “The brand names of insurance products must not use terms or phrases that convey a fabricated sense of security,” IRDAI said. Advertisements should ensure that: Any expression of opinion of the insurer is a fair and honest representation. Any statement of fact, promise or projection discloses all the relevant assumptions; and indicates in a clear and prominent way significant limitations/criteria on which any special offers are available.
 
8. Any claim of rating/award should be based only on those declared by entities which are independent of the insurers and its affiliates. Insurers and its affiliates should not however, procure services from such independent entities so as to get a rating/award. Source of such rating/award is to be disclosed conspicuously and legibly in such advertisements. No claim of ranking by Insurer, as regards its position in the insurance market, based on any criteria (like premium income or number of policies or branches or claims settlements etc.,) is permissible in any of the advertisements.
 

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COMMENTS

Gunasekaran

2 years ago

BLATANT MISSELLING IS GOING ON.IRDAI SHOULD ACT IMMEDIATELY ON RECEIVING THE COMPLAINT BY EMAIL AND SHOULD NOT INSIST THE INSURED TO FILL IN A PRESCRIBED FORM AS COMPLAINT IS A COMPLAINT . THIS IS NOTHING BUT HARASSING THE INSURED I.E. TILTING TOWARDS INSURERS. REG. TPA: EARLIER TPA WAS NOT THERE AND LATER TPA WAS OPTIONAL AND NOW IT IS COMPULSORY. WHEN EVERY INSURERS HAVE APPROVED TPAs and HOSPITALS IRDAI,IF UNBIASED AND TRANSPARENT, SHOULD ENSURE THAT INSURED'S FUNDAMENTAL AND CONSTITUTIONAL RIGHT OF CHOOSING THE TPA AND HOSPITAL AND NOT AGAIN THE PARTICULAR TPA RETAINED BY INSURERS AND AGAIN THE HOSPITALS RETAINED BY TPA.
THIS IS NOTHING BUT BREEDS NEXUS AMONG INSURERS, TPA AND HOSPITALS. WHAT I EMPHASIS IS WHEN TPA IS COMUPLSORY WHY NOT THE INSURED CHOOSE TPA APPROVED BY INSURERS AND AGAIN INSURERS MAKE IT COMPULSORY TO STRICT TO ONLY THE TPA RETAINED BY TPA AND HOSPIALS RETAINED BY TPA. WHAT ALL THESE DRAMA AND IT HAS BEEN ALLOWED BY IRDAI TO ENACT BY ALL THESE WESTED INTEREST IGNORING THE FUNDAMENTAL AND CONSTITUTIONAL RIGHT OF INSURED. INSURED IS NOTHING BUT PUPPET IN THE HANDS OF INSURERS, TPA AND HOSPITALS. IS THERE ANY DEMOCRATIC WAY OF FUNCTIONING TRANSPARENTLY IN THIS GREAT COUNTRY INDIA. IRDAI BECAME PUPPET IN THE HANDS OF INSURERS AND TPAS ETC. WHEN WILL IRDAI PLAY LEVEL PLAYING ROLL. WHY FINANCE MINISTRY AND OTHER MINISTRIES INCLUDING PRIME MINSTER IS CLOSING THERE EYES. I REQUEST MONEYLIFE TO TAKE THIS AS A MISSION TO ACHIEVE IT.

Gopalakrishnan T V

2 years ago

Many Insurance companies make advertisements, sends smses and emails to trap innocent and gullible public. It is better if IRDA apart from keeping a watch on these companies should insist that all the insurance companies should give their Registration or license no or what ever it is in all their advertisements, smses and emails etc.IRDA also should have a window to enable the public to verify whether the companies are approved by it.Once trapped, it is difficult to get back the money and companies know how to hoodwink the payment of claims by taking full advantage of the lapses available in the Governance system of the country in general and IRDA in particular.

vswami

2 years ago

Add Link: Caveat Emptor or Caveat Venditor: Where are We Heading

vswami

2 years ago

OFFHAND
The norms and disclosures stipulated by the IRDA may hopefully help in checking and controlling the long obtaining irregularities of ’mis-selling’. However, more importantly, what must be ensured is that the applicable ‘terms and conditions’, subject to which the contract of insurance in entered into , hence binding and calling for strict compliance by the insurer, must be clearly spelt out; and incorporated /disclosed unambiguously, in as great details as possible, in the policy document itself. Last but not least, in the nature of things, the document must make it unambiguously clear that the terms and conditions so spelt out , in so far as those are material and go to constitute the very substratum / essence of the contract , are to apply for settling the ‘claims’ , with no change whatsoever. To put it differently, any subsequently introduced changes, for reasons such as any change or modification in the erstwhile scheme, should have application only to new policies; that is, not to the existing /ongoing policies.
These and other like aspects need to be examined and be covered by IRDA suitably, by framing a set of special and specific rules ; so also the measures to implement effectively, with no or the least scope for any deficiency.

Of course, it is up to the Insurance law experts , within and without the government, having the requisite expertise and benefit of field experience, to come forward and make a valuable contribution , in the form of well- considered suggestions and useful recommendations as to how best to regulate the insurance sector.

For, it might not be prudent not to realise any longer that there has been lately a drastic change in perception on the rule of the game; that is, in place of , -buyers beware (‘caveat emptor’), by and large, the rule has been steering round to,- sellers beware ('caveat venditor')- ref. the info. in public domain.

Shutdown in Gujarat over reservation for Patel community
A state-wide shutdown was observed in Gujarat on Wednesday, a day after a Patidar mega-rally was held here demanding reservations in education and jobs for the Patel community.
 
Hardik Patel, 22, convener of Patidaar Arakshan Andolan Samiti (PAAS) was detained and taken into custody by the police after he launched a sudden hunger strike at the GMDC Ground late Tuesday evening.
 
After being released, Patel appealed to his followers for peace and restraint, and also announced a state-wide shutdown on Wednesday.
 
Earlier, he had served a 48-hour ultimate to the state government to concede the PAAS demands following which he said agitation would be intensified.
 
As news of the police action on Patel spread, angry Patidars reacted violently in different parts of the state, attacking public and private properties, buses, vehicles, even as Chief Minister Anandiben Patel appealed for peace.
 
As per tentative counts, more than 100 buses have been damaged in different cities, while several private cars and motorcycles were set on fire in different parts of the state.
 
Tuesday's mammoth mega-rally had over 1.20 million Patidars. It capped a 55-day long agitation across the state with scores of mini-rallies in different towns and cities for the main demands of the Patel community.

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Regulators: Pension Advance Companies in the US Deceived Veterans
Lawsuit alleges retirees were duped into borrowing against pensions
 
A lawsuit filed last Thursday by state and federal regulators in the US against two pension advance companies alleges that the online services misled military veterans and others by duping them into borrowing against their pensions. 
 
The lump-sum cash advances that retirees received in exchange for pension payments were in fact loans that carried high interest rates of as much as 28 percent and other hidden fees, the lawsuit against the California-based companies, Pension Funding LLC and Pension Income LLC, alleges.
 
The Consumer Financial Protection Bureau (CFPB) and the New York State Department of Financial Services filed the lawsuit. It alleges that, from 2011 until about December 2014, the companies offered consumers lump-sum cash advances for agreeing to redirect all or part of their pension payments over a period of eight years.
 
In May, the CFPB warned that “…it’s illegal for lenders to take a military pension or veterans’ benefits.” The lawsuit seeks to recoup monetary losses for those who were duped into taking out the loans.
 
Find more of our coverage on loans and vets here
 

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