IRDA has proposed a slew of changes recently. It is mix of good, bad and ugly. What do Moneylife readers have to say?

The Insurance Regulatory and Development Authority (IRDA) has made slew of changes including major ones for pension products and web aggregators in the recent past and more upheaval is coming. Each change impacts the insurance industry as well as customers. We have summarised the changes here. We would love to hear from you about these changes.

Life Insurance:

Will single-premium products be reformed?

IRDA is not happy with insurance companies increasing focus on single-premium products which has acceptability with customers, too. Even with ULIP (Unit Linked Insurance Product) business steadily going down by 17% over one year, single-premium products did well. IRDA wants to re-emphasise insurance as a long-term business wherein regular premium products enforces disciplined savings and helps with rupee cost averaging. Single-premium products lack these important aspects for customers.  

Will loan on ULIPs be banned?

IRDA may ban loans against ULIPs as equity exposure of the product can make the loan risky for insurers. The regulator is keen on not having the loan clause in the new product approval. It is debatable if this is a step in the right direction as the loan given against ULIPs having more than 60% equity exposure is 30% to 40% of the fund value. The market will have to really crash by 60% to 70% to make the loan bad.

IRDA’s focus on needs-based life insurance sales

IRDA exposure draft on needs-based life insurance sales is a welcome step to reduce mis-selling, but will customers really share all the information especially if it is optional? The draft states that insurer or a distributor must make “reasonable efforts” to obtain a consumer’s suitability information prior to making a recommendation. It means that customer suitability information is optional which will entail most of the customers bypassing the questions or intermediaries making half-hearted attempts to get answers.

IRDA may disallow advance premium payments

The draft norm directs life insurance players to stop accepting advance premium payments. Policyholders can make premium payment only 15 days in advance for monthly mode of payment and 30 days in advance for other payment options. Is it over-regulation? Many policies allow advance payment to earn some interest or discount.  

Health Insurance:

IRDA wants more day-care procedures covered

IRDA has urged insurers to launch more ‘day-care’ based covers. Medical technology advancements have helped many treatment procedures possible without hospital stay. Mediclaim covers for 24-hour hospitalisation and some day-care procedures.

IRDA’s health insurance forum for evolving policies and processes

IRDA has finalised the structure of its much-awaited health insurance forum. The forum will provide assistance and advice to IRDA on issues relating to health insurance segment. The forum, among others, would include CEOs of three health insurance companies, CEOs of three life insurers, one representative from standalone health insurance companies, CEOs of two TPAs, officials from labour and health ministries, representatives of health service providers and only one nominee of the IRDA to represent consumers.

Will insurance be a reality for HIV/AIDS infected?

According to IRDA’s draft norms, all life and non-life insurance companies will have to put an underwriting policy on insuring the health of people suffering from HIV and people vulnerable to HIV/AIDS under their health insurance policies. The premium pricing for life and health insurance will be a challenge for insurance companies. The regulator has asked companies to charge a suitable premium and loading. Star Health and Allied Insurance is the only company that has a product exclusively covering HIV/AIDS called Star Net Plus.

Life and General Insurance Industry:

IRDA talks tough on bundling of insurance products

IRDA has proposed to regulate bundling of insurance products with other services and goods due to possible forced sales or mis-selling. Among service providers, insurance cover is bundled along with loans, credit cards and mutual funds. IRDA is contemplating whether it should take a view of disallowance or allow the activity with some checks built in.

Trouble for bank-promoted life insurance companies

The bancassurance exposure draft of IRDA brings cheer to standalone insurance companies like Max Bupa, Apollo Munich and Star Health. It will also open the doors for life and non-life insurers which don’t have many bancassurance tie-ups. Adversely impacted will be bank-promoted insurers. The key points in the exposure draft are as follows:  

• One bancassurance agent should not tie up with more than one life, one non-life and one standalone health insurance company in any state, in addition to one each specialised insurance company.

• IRDA has divided the country into three zones. The draft norms have proposed to limit insurers, other than the specialised insurers, to tie up with not more than nine out of 13 states/cities and six out of nine states/cities in Zone B. Zone C, which comprises 17 states/union territories, has no restrictions.

Mentoring of junior agents

IRDA may allow both life and non-life insurance industry senior agents to mentor junior agents to reduce mis-selling. It will come at price for junior agent of 25% of first-year commission.