Will life insurers offer customised benefit illustration from next month?

Traditional insurance products are set for makeover from October. Insurers will have to provide the prospective policyholder a customised benefit illustration. It is time that insurers’ offers become transparent, instead of them handing out worthless generic benefit illustrations

Consider a prospective customer aged 50 years wanting to buy a 10-year premium payment term (PPT) LIC Jeevan Anand policy. What is the value if he is shown a benefit illustration for a 35-year old buying a 25-year PPT policy? The generic illustration is a worthless piece of data, as the mortality rates increase steeply with age, and the reversionary bonus rate differs with the PPT. A 50-year old policyholder will pay much higher risk cover charges every year than a 35-year old. The impact of it is that the 50-year old policyholder will have much lower returns at the end of policy term than the 35-year old. But the benefit illustration does not reflect this. Moreover, recently declared LIC bonus rates have Jeevan Anand PPT less than 11 years, giving a bonus of Rs37 per thousand sum assured (PTSA), Rs40 PTSA for PPT 11 to 15 years, Rs44 PTSA for PPT 16 to 20 years and Rs48 PTSA for PPT over 20 years.
 

A generic benefit illustration is not just worthless but is even prone to mis-selling. Existing traditional products are being phased out by the end of September. New traditional products approved by Insurance Regulatory and Development Authority (IRDA) will hit the market from October. The new guidelines have the requirement of customised benefit illustration: “All insurance products shall provide the prospective policyholder a customized benefit illustration, illustrating the guaranteed and non-guaranteed benefits at gross investment returns of 4% and 8% respectively and as specified by IRDA or Life Insurance Council from time to time. The corresponding net yield shall be demonstrated only with respect to gross investment return of 8% p.a. Such benefit illustration shall be signed by both the prospective policyholder and the intermediary and shall form part of the policy document.”

 

It means that from next month insurance companies can no longer give generic benefit illustrations for traditional products. Today, LIC has generic benefit illustrations for its traditional products. Some private insurers offer customised benefit illustrations with a few of them offering online customised benefit illustrations. According to one private insurer, “We offer customised benefit illustration for traditional products in most markets. It is difficult to implement it for rural markets. We have raised question to IRDA about difficulty with 100% compliance with the requirement. Ask me to do what I can implement.”

 

V Manickam, secretary general, Life Insurance Council, says, “Insurance companies will have to comply with the IRDA guidelines on customised benefit illustration. We have not heard from life insurers about difficulty in implementation. There is initiative of common service centers (CSCs) e-Governance Services India Ltd which should help with rural markets.”
 

Moneylife emailed to eight insurance companies including LIC asking the following questions –
 

  • Can you tell me what percent of business today is being done using a customized benefit illustration for traditional products?
  • Is it offered even for rural locations?
  • Will you offer customized benefit illustration for traditional products effective 1 October for all the markets?
  • Will the initiative of CSC help to implement customized benefit illustrations in rural markets?


There was no response from any of the insurers except one, who responded “No comments can be offered to your query. As a registered insurer in India, we are bound to follow the guidelines.”

 

It’s time insurance companies including LIC get proactive about offering transparency to customers. A Harvard Business School study shows that LIC agents have an incentive to recommend more expensive and less suitable products to consumers. The study suggests that the government-owned organisation does not encourage its sales agents to provide better advice and that government ownership does not appear to solve the problem of unsuitable advice.

 

Lackadaisical approach from some private insurers is also prevalent. Benefit illustrations of many old ULIPs were mis-leading. Agents would present deceptive benefit illustration, sanctioned by the Regulator to seal the deal. Moneylife had written about how one senior citizen relied on the misleading benefit illustration of HDFC Life Young Star product that conveniently ignored the steep mortality charges, which made up for 80% of the premium. The insurance company benefited by keeping the customer in the dark about how much part of the premium really goes towards mortality charges. It is certainly an ingenious way for a life insurance company as they benefit with hefty mortality charges due to higher age of the insured as well as from the expensive Waiver of Premium (WoP) feature. After all the other charges of premium allocation and policy administration charges are deducted, what goes into investment is negligible and hence the corpus after seven years was dismal. HDFC Life child plan sold to senior citizen erodes 96% of investment amount!

 

Bajaj Allianz Life sold old ULIP (Capital Unit Gain) to a consumer without obtaining his signature on the sales illustration, as mandated by IRDA. Moneylife intervention helped to solve a difficult case that even insurance ombudsman had refused to take up. Bajaj Allianz generously agreed to a settlement of Rs30,000. Bajaj Allianz Life refunds Rs30,000: Another Moneylife Helpline success

 

Read - LIC agents’ last hullabol for selling traditional products before service tax regime

 

IRDA guidelines impact commission and surrender value of traditional products

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    COMMENTS

    tarun bansal

    7 years ago

    Please note in case of LIC agents, most of the agents are gettind advanced. LIC agents know a days uses laptops and tabs equiped with specialize softwares, through which they are not only providing customized presentations to the prospects, but also offers great after sales services.

    Tejas shah

    7 years ago

    Mr.Raj Pradhan,

    I observe your articles quite closely and understand that you bring about a lot of new things. I understand that your observation is good. But tell me something... Are you paid for criticizing a co or some agent ???? you are also a citizen of India... Have u ever pointed out to IRDA or an insurance company for any fault and asked them to change some guideline before a dispute comes ?

    Be a citizen first... Rather asking questions, Try giving recomendations.

    REPLY

    raj

    In Reply to Tejas shah 7 years ago

    Just to add to what Sucheta maam has mentioned here - Customised benefit illustration for traditional products is good move by IRDA. It is up to the life insurance companies to comply with it from next month. The article highlights that none of the top 8 life insurers have any feedback about it.

    Sucheta Dalal

    In Reply to Tejas shah 7 years ago

    Astonishing . Please go to http://foundation.moneylife.in and look at the number of issues and memoranda that are taken up with IRDA. Also check out our helpline and see how many have been helped. And having done that, please tell us your motivation in making such a FALSE, ILL Informed and dubious comment.

    DEEPAK KHEMANI

    7 years ago

    Raj,
    Any Agent/Adviser having a simple software either OEM or Company provided can provide a customized benefit illustration about the benefits of the plan the customer is about to take.
    I'm sure most of the professional agents are already doing the same.
    What changes now is that previously it was 6% and/or 10%, now it becomes 4% and/or 8%
    Any person showing an illustration of a 35 yr old to a 50 year old is false misleading and qualifies for mis-selling.
    The questions you have asked the Insurance companies are in my view impossible to answer, the reply can only be an approximation, with the new rules in place it may become easier to do so.

    REPLY

    raj

    In Reply to DEEPAK KHEMANI 7 years ago

    Deepak,
    As mentioned in the article, some private insurer are offering customised benefit illustration and few have it online too. But, LIC agents DON'T have it today even though LIC Direct Marketing may have some software.

    I don't agree that the questions were impossible to answer by top 8 insurance companies.

    Can you tell me what percent of business today is being done using a customized benefit illustration for traditional products? - IT CAN BE ANSWERED EASILY.

    • Is it offered even for rural locations? - IT CAN BE ANSWERED EASILY.

    • Will you offer customized benefit illustration for traditional products effective 1 October for all the markets? - THE ANSWER CAN BE THAT IS WORK IN PROGRESS. NOTHING SPECIFIC WAS ASKED.

    • Will the initiative of CSC help to implement customized benefit illustrations in rural markets? - ANSWER CAN BE THAT THEY ARE EXPLORING IT. NOTHING SPECIFIC WAS ASKED.

    DEEPAK KHEMANI

    In Reply to raj 7 years ago

    Well Raj we from our side have been offering customized benefit illustrations for LIC policies canvassed by us from the last 6-8 years for all our customers. I can say that for myself with conviction.
    There may be many who don't.
    What the article implies is that ALL LIC agents are not doing it, there may be a few there maybe many but please don't brush the whole fraternity with one brush.
    All the new regulations are of course welcome.

    LIC agents’ last hullabol for selling traditional products before service tax regime

    Traditional insurance products are set for a makeover from October. While there are some positives with new regulations, insurance agents are mis-selling existing products as a limited time opportunity. LIC agents have an additional incentive of service tax levy to push products before the deadline

    From October 2013, Life Insurance Corporation of India (LIC) will charge policyholders service tax on the premium of traditional products. Until now, this tax was absorbed by the insurer. The service tax for traditional products is 3.09% of the first-year premium and 1.545% in subsequent years. In a recent announcement, Insurance Regulatory and Development Authority (IRDA) mandated that service tax will not be included in the contractual premium, but it is to be collected from policyholders separately. It is expected, that with service tax being charged separately from the policyholder, the bonus on the product would improve. But, LIC agents are using the service tax levy as an excuse to push sales before the October 2013 deadline.
     

    Today, LIC agents are just as busy as they are during the tax-savings season due to additional reason i.e. existing traditional products will be discontinued after September 2013. While there are some positives for customers with new regulations like higher surrender value, lower agent commission and better insurance cover, agents are mis-selling existing traditional products as a limited time opportunity. An insurance agent of any company trying to shove life insurance policy, as a deal worth grabbing, is only talking baloney. After all, reduced agent commissions next month cannot be something agents look forward to.
     

    According to one ethical LIC agent, “There is confusion among agents and hence the strategy is to go for the kill as they are unsure about their effectiveness to sell new traditional products next month. Moreover, we don’t know about the new products LIC has lined-up. But, if I hard-sell to my customers today, then how do I sell them products next month?”
     

    Life Insurance Council, the industry body of life insurers in India, has proposed to Insurance Regulatory and Development Authority (IRDA) an extension of reasonable time for new traditional products regime to take place. V Manickam, secretary general, Life Insurance Council says that he has not asked for specific number of days/months of extension, but looks confident that insurance companies will get reasonable extension. IRDA making an extension before end of September will hardly be a surprise. In March 2013, IRDA had said that ‘standard proposal form’ guidelines would be effective from 16 February 2013. It has already been extended for life insurance companies to 1 April 2014. 
     

    There are media reports about LIC portfolio reducing from 52 products to just seven next month plus four new launches. While LIC is tight lipped about new product details to agency force, it may be doing so to mop up as much premium this month as possible, before unveiling the products next month. While insurance companies are in the process of product re-filing, we have to see how many products IRDA can approve.
     

    Here are some important changes for traditional insurance products coming next month:

    1. In case of regular premium insurance policies, a policy with a premium paying term (PPT) of five years will not pay more than 15% in the first year. Products with PPT of 12 years or more will have first year commissions up to 35% in case the company has completed 10 years of existence and 40% for the company in business for less than 10 years.
       
    2. Online policy sales and other direct sales of products will have no commissions and that benefit will be passed on to the policyholder.
       
    3. The minimum guaranteed surrender value for traditional plans has been pathetic. The existing guaranteed surrender value is 30% of all the premiums paid minus the first-year premium and is paid only if premiums have been paid for three years. This has been improved to some extent by the guidelines. For traditional plans with PPT of less than 10 years, the guaranteed surrender value will accrue after the second year. For PPT of 10 years or more, there will be a guaranteed surrender value after three years. This guaranteed surrender value will be 30% of total premiums paid. The surrender value becomes 50% between the fourth and the seventh years. The surrender value after seven years will have to be cleared by the regulator.
       
    4. The minimum death benefit for single premium policies will be higher of 125% of the single premium, or minimum guaranteed sum assured on maturity, or any absolute amount to be paid on death. For those with age more than 45 years, it will be 110% of the single premium.
       
    5. For regular premium products purchased by policyholder of age less than 45 years, it will be higher of 10 times the annualised premium or 105% of all premiums paid on date on death or minimum guaranteed sum assured on maturity, or any absolute amount to be paid on death. For those aged more than 45 years it will be seven times the annualised premium.

    Read: IRDA guidelines impact commission and surrender value of traditional products

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    COMMENTS

    Amit Kumar Rai

    7 years ago

    if these policies like jeevan saral and jeevan anand are going to be closed. so what will happen to old jeevan saral and anand policies. i know it will continue but future profit giving in these schemes will less from lic compared to other active policies. if IRDA giving more time to bring new policies in place of all this, why they are not stopping selling of jeevan saral and anand after extension of times or giving of more times. also they ask lic to close all the previous policies of jeevan saral & anand with profit distribution as of now, because all old jeevan saral & anand policies and many other policies which are going to be closed will not be given more profit as their new policies.

    Sanjay M Shah

    7 years ago

    DEAR FELLOW AGENTS THERE ARE TWO SIDES OF A COIN. WE DO NOT KNOW EXISTING PRODUCT WILL COME AGAIN WITH SAME TERMS & CONDITIONS/BENEFITS. MIS-SELLING CAN NOT BE AVOIDED, WHY BLAMING ONLY AGENTS FOR THAT.MOST OF MIS SELLING IS BY BANKS & BROKERS.TO SOME EXTENT IT IS MISTAKE ON PART OF POLICYHOLDER IN SELECTING AGENTS. SOMETIMES WHEN A POLICYHOLDER IS ASKED TO BUY A POLICY HE SAYS THAT SOME RELATIVE HAS TAKEN NEW AGENCY OR SOME AGENTS WANTS TO COMPLETE HIS QUOTA OR TARGET HE HAS GIVEN POLICY TO HIM/HER FOR OBLIGING. IN SUCH CASES MOST OF SALES IS MIS-SALES.
    WHEN THINGS WERE AVAILABLE EASILY ON MANY OCCASION PEOPLE DEFER DECISION OF BUYING THE SAME UNLESS IT IS URGENTLY REQUIRE, BUT WHEN RUMOR OR NEWS COMES, ALL OF SUDDEN PEOPLE RUSH TO BUY THEM. LIFE INSU POLICY SELLING REQUIRE SKILLS & NEED IS TO BE CREATED IN MINDS OF PEOPLE, THIS IS NOT PHYSICAL PRODUCT U JUST DISPLAY & SELL. THERE IS NOTHING WRONG IF MARKETING IS DONE WHEN POLICIES R NOT AVAILABLE AFTER 1/10/2013. WHY U HAVE BECOME AGENT? TO SELL & EARN COMMISSION. ONLY THING AGENT SHOULD DO IS TO SELL NEED BASED.

    TRILOCHAN KUMAR RAI

    7 years ago

    AO DOSTO LIC KE NAYE
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    POTER PHATEGA

    LIC KA NAYA PLAN NIKLEGA

    AUR

    KEWAL LIC HI TIKEGA


    TRILOCHAN KUMAR RAI
    9210996529




    TRTR

    Samira Patel

    7 years ago

    Thank you MoneyLife, your team is doing a good job in raising issues that affect the general investor in India. Your write-up makes complete sense and I partially agree with the fact that LIC Agents do mis-selling at the time of plan closures. However, me too being an Agent for more than 2 decades, I wish to explain why LIC agents suddenly become aggressive. If you carefully look at the LIC’s Agency force, you will notice that most of the Agents are pure Salesmen. A majority of them are under-graduates or graduates at the most. They do not understand much about what is going on in the financial market and how it will affect their business.

    Since 2005 or 2006, the top management of LIC has become unethically aggressive. Every top ranking official wants to show growth in number of policies and premium in order to please his superiors. The Super boss of LIC wants to please his bosses sitting in Delhi. But it is not easy to show genuine growth overnight. They show growth in policies by engaging in splitting of policies. For example, if a policyholder wants to buy a Rs.10 Lakh Insurance policy, then split his policies in to 10 policies of 1 Lakh each or even 20 policies of 50,000 each. Unprofessional Agents take the responsibility of convincing the clients for getting recognition and prizes in the competitions floated by LIC on ‘Policy Basis’. The Agent will get additional incentives for selling more policies even though it is on a ‘Single Life’. The indirect beneficiaries are LIC bosses who show higher penetration of market in their tenure by using such tricks of trade. But the price of this is paid by the policyholders who get lower bonuses as the expenses of the Corporation rise on account of splitting of policies.

    Coming to the ‘ Premium’ part of the story. Till a few years ago, LIC used to bifurcate the premiums as Regular Premium, Single Premium, Individual Pension Premium, Pension and Group Savings Premium, Group Insurance Premium, etc. But since the past few years they are showing consolidated Premium figures without any bifurcation. So now even Premium garnered by Group Insurance and Group Annuity Schemes are merged into the Annual Premium Collection figures shown by LIC. If LIC bifurcates each segment of premium as it used to do earlier, then probably everyone, including the policyholders will be in for a rude shock. The truth is that in comparison to earlier times, LIC is now faring poorly in traditional insurance policies where-in a client undertakes to pay renewal premium for 10 or 20 years. Therefore LIC is banking on single premium and group business to show growth on Premium.

    As an LIC Agent I have attended many Agent’s meetings where the Branch Managers, Marketing Managers and even Sr.Divisional Managers misguide the Agency force into hard selling or unethical selling at the time of plan closures. We have witnessed it during the ULIP euphoria. Top ranking Managers would visit Branches like Financial Gurus confidently forecasting that the Sensex will attain 50,000 points and LIC being a dominant player in the stock market, the NAVs of its ULIP plans will zoom up beyond anyone’s expectation. They used to distribute pamphlets, brochures and colorful charts to prove their point. Fake news of Agents mobilizing Crores of funds in remote places in India was deliberately spread in order to motivate other Agents to sell ULIP plans. Special Competitions were launched with attractive prizes in order to lure Agents into selling ULIps. Many Agents succumbed to false propaganda and today have lost their credibility in the market as the NAVs of all ULIPs are faring badly.

    Now we are facing the second phase of this madness. Senior Managers are quoting the Chairman declaring that the entire Corporation will retire on 30th September and will begin afresh on 1st October. They are tweaking the quote to explain to Agents that from 1st October, LIC policies will become unattractive as it will be loaded with Service Tax which a customer will not be in a mood to pay. Secondly, they are scaring the Agents saying that popular Plans will be withdrawn and Commissions will be slashed drastically. In such a scenario, how do you expect the otherwise un-informed or mis-informed Agency janata to react? They will slog as if its their last few days on the planet earth. Competitions are being floated with Cash prizes up to even Rs.50,000 on single premium policies. Earlier only Agents and Development Officers were paid Incentives. But since 2006 onwards, even Branch Managers and Marketing Managers are given Incentives in the form of expensive gifts like LED TVs, Holiday trips, Smart phones, Laptops, gift coupons, home appliances, etc. These managers try to make the most of it by using unethical sales practices and misguiding Agents and policyholders as their posting in a particular office is for a maximum period of 3 years after which they are transferred to some other place. This is precisely what happened during the ULIP euphoria. The Managers who promised us the moon is nowhere in sight. They just grabbed all the gifts and vanished to some other city. It is we the Agents who are bearing the brunt of policyholder’s wrath.

    Friends, LIC is not what it used to be till the 1990s. Earlier, the top bosses were visionaries who carefully crafted LICs growth story. With just a 5 Crore grant from Central govt in 1956, they carefully built a multi-Lakh Crore financial giant with a formidable Sales force of about a million Agents. But today, the picture is exactly the opposite. Scams and Corruption have become common. If LIC in not brought on track soon, it may be forced to go the UTI way.
    If reputed teams like MoneyLife can keep a check on financial institutions, then i am sure it will do a lot of good for the common man.

    REPLY

    GANESH

    In Reply to Samira Patel 7 years ago

    Thanks .What you said is 100% true. The Splitting of policy is termed as ODC. Definitely not beneficial for policy holder.Even 3 types of policies will be enough if the bonus rates are raised to 60 level from the present 48.Relaxation in 45+ years band on medical terms will do a world of good for LIC. Last but not the least, THE AGENT WORK FORCE on whose back the Organization has built Castle is not well taken care off. What ever percentage commission bla bla mentioned and given ,everybody knows how it is spent.There is no recognition for a 5 year or 10 year or a 15-20 years Agent who has been loyal to the corporation. No 5 year pay commission for them as to employees of LIC . Even if LIC pays starting with 2k/month for all 5 years completed agent as a recognition of his rendered service, LIC will grow manifold times in near future.

    Nithya

    In Reply to Samira Patel 7 years ago

    Thanks for sharing the information.

    Aniruddha Sengupta

    In Reply to Samira Patel 7 years ago

    Kudos for sharing your views with forthrightness!

    Ashish Anand Mahajan

    In Reply to Samira Patel 7 years ago

    Thanks Samira,
    i m also an LIC advisor since so many years.

    I m completely agree with YOU.
    Now a days LIC agents r create a fobia to the clients as LIC is about to getting close.

    They don't think that ''Every Change is Inevitable''.

    I also asked to my clients to get the policy before 30 sep 2013 but not with wrong commitments.

    Here are some good things that Policy holder can switch the exsisting policy in New Form with paying service tax, if it looks attractive to him.

    So morally if the same product comes with less premium (as New Mortality Rate Chart is being implemented after 30 Sep 2013,) it's our moral responsibility to convert the existing one into new form.

    Ashish Mahajan

    raj

    In Reply to Ashish Anand Mahajan 7 years ago

    Dear Mr Mahajan,

    You said - Here are some good things that Policy holder can switch the exsisting policy in New Form with paying service tax, if it looks attractive to him.

    Please explain how one can convert existing policy to new product from Oct 1?

    You said - So morally if the same product comes with less premium (as New Mortality Rate Chart is being implemented after 30 Sep 2013,)

    Will the new mortality rates be lower or higher after 30 Sep?

    hitesh budhedeo

    In Reply to Samira Patel 7 years ago

    Many thanks to you for providing all details . I was forced to check online the details regarding s. tax & closure of policies ,as the agent i felt, was trying to misguide me.
    Thanks once again

    raj

    In Reply to Samira Patel 7 years ago

    Dear Samira Patel,

    Many thanks for your knowledgeable feedback!

    Nikhil Dhami

    7 years ago


    People are being mislead by agents.

    Thank You Money Life bring this to Notice. Service tax was any way being paid from policy holders pocket..Premium would increase with this change so do the bonus from LIC.

    Hello

    7 years ago

    if any one want to purchess LIC policie...so he should wait for new policies or should buy any one of old policy before 30-09...from customer profit perspective

    G Srikanth

    7 years ago

    This is definitely, to boom private insurance companies, our traditional products of LIC has been withdrawn in the name of Service Tax, Commission to agents etc.

    Dilip Kokane

    7 years ago

    Dear Raj, Please check new commission rates of IRDA guidelines and compare with existing rates payable to LIC agents. You will find that the agent will get more commission after 30-09-2013, so why he will make hullabol? It is service tax issue and not our commission.If any doubt write me [email protected]
    Dilip Kokane

    REPLY

    raj

    In Reply to Dilip Kokane 7 years ago

    Dear Dilip,

    I hope you read the IRDA guidelines correctly. Today, LIC agents get 35% first year commission for traditional products irrespective of the policy term. Please explain how agents will get more commission post Sep 2013?

    New guidelines - In case of regular premium insurance policies, a policy with a premium paying term (PPT) of five years will not pay more than 15% in the first year. Products with PPT of 12 years or more will have first year commissions up to 35% in case the company has completed 10 years of existence and 40% for the company in business for less than 10 years.

    DEEPAK KHEMANI

    In Reply to raj 7 years ago

    Raj,
    what Dilip is saying is correct, there is effectively no change in Commission structure even after 1-10-13.
    What you need to know is that today also the agent has a similar payout structure on lower ppt. What changes is the Surrender value payable to the client, BUT here does anyone buy an Insurance policy Traditional version so that he can surrender it?
    Then he oe she is better off in ULIPS or Mutual funds!

    Nikhil Dhami

    In Reply to Dilip Kokane 7 years ago

    Helo Dilip

    Please read point no 2. there will be no commission for online sales and benefit will be passed on to policy holders.

    i am sure this article has hit below the belt.

    Thanks Moneylife for highlighting this.

    Regards
    Nikhil

    Deepak Gupta

    7 years ago

    Other than pure term insurance, insurance in our country has remained a legal form of thuggery. And the industry - public+private - has always acted as a cartel of thugs.

    So, this behaviour is not surprising. Kudos to Monelife for highlighting it.

    REPLY

    Yogesh

    In Reply to Deepak Gupta 7 years ago

    This changes will be good, as I heard there will be term insurance can be clubbed to Mediclam policy. I think we whould wait and see what new policies these companies bring into market due to compitetion. I we can old policies and then if we can club mediclam with term insurance it will be good for us.

    Nikhil Dhami

    In Reply to Deepak Gupta 7 years ago

    Sorry Deepak,

    This response was meant for Dilip..

    i can not recall this :)

    Regards
    Nikhil

    Nikhil Dhami

    In Reply to Deepak Gupta 7 years ago

    Mr. Gupta..

    Did you read point no 2. there will be no commission fro online sales.

    I am sure this article has hit below the belt.

    Regards
    Nikhil

    sivasankaran

    7 years ago

    THE AGENTS ARE AT THEIR BEST IN EXPLOITING THE SITUATION TO THEIR BENEFIT LETTING THE LAY/HAPLESS MEN SUCCUMB TO THEIR DIRTY TRICKS

    RAJENDRA P

    7 years ago

    whether service tax will be levied on the old policies taken on or before 30/09/2013 by the insurer

    REPLY

    raj

    In Reply to RAJENDRA P 7 years ago

    no

    Parag Mehta

    7 years ago

    Needed clarification on the hearsay that in case of mediclaim policies also, service tax is to be collected separately from policy holders and it will be on new policies taken subsequent of october 2013 and not on existing policies.
    Kindly clarify.

    E-Insurance launched; IndiaFirst offering demat for all policies

    IRDA's Insurance Repository System is going online. Insurers will save money with the green initiative due to less paperwork, mailing and one-time KYC. But will they pass on the savings to customers?

    In a move to lower the costs for insurance companies and bring transparency to policyholders, finance minister P Chidambaram on Monday launched the Insurance Regulatory and Development Authority (IRDA)'s  Insurance Repository System (IRS). The System will help insurers to save costs on printing and dispatching policies.

    IndiaFirst Life Insurance is amongst the first to offer all life insurance policies in demat format. Its press release states, "The electronic insurance account will do away with the need for KYC norms like address and identity proof for every purchase and will bring in all the benefits of demat to the insurance business, including automatic reminders for premium."  

    According to IRDA's senior official, Life Insurance Corp of India (LIC) spends Rs600 on storing each policy. With e-insurance, insurance companies will save crores of rupees every year on storing of physical insurance documents, mailing and repeat KYC. According to IndiaFirst press release, "Insurance companies will have a huge cost incentive in encouraging customers to hold their policies in electronic form."  But, will the savings be passed to policyholders with increased bonus or lower premium? Unlikely, because insurance companies will be paying the 'insurance repositories' for maintaining the data in an electronic format. The savings on dematerialisation of stocks has not been passed on to customers (i.e. shareholders), so why would it be any different this time?

    According to Dr P. Nandagopal, CMD, IndiaFirst Life Insurance, "Going forward, we will also implement the demat format for low cost plans especially micro insurance.  In these cases the costs saved will automatically be transferred to the customer.  This will be taken into consideration while designing the plan itself."

    IRDA recently said that five companies have been given the status of insurance repositories and are provided with a licence that will be valid till 31 July 2014. Insurers can enter into agreements with one or more repositories. The five companies are: NSDL Database Management Limited, Central Insurance Repository Limited, SHCIL Projects Limited, CAMS Repository Services Limited and Karvy Insurance Repository Limited.

    The repository will give a unique number to every individual and all his life insurance policies will come under that account. The IRS will also have digitised non-life insurance policies soon. The data maintained by the repository will include history of the claims of the individual. It will also have the names of the beneficiaries, assignees and nominees. There is no trading of insurance policies in demat form and, hence, this facility may be of limited use for the customer.

    Procedure for opening an e-Insurance account:

        Download the e-Insurance Account opening form from the IndiaFirst website
        Fill the form and provide the KYC documents (attested)
        Send the filled e-Insurance Account application form to IndiaFirst
        e-Insurance Account form will be sent to the respective IR (Insurance Repository) by IndiaFirst
        IR (Insurance Repository) will generate the e-Insurance Account number on the basis of information in the account opening form and inform the e-Insurance Account number to IndiaFirst Life
        IndiaFirst will credit the policy information in electronic form against the customer e-Insurance account on IR portal
        IR will intimate customer on successful upload of his policy in e-Insurance account
     

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    COMMENTS

    AlankitGroup

    6 years ago

    AlankitGroup:-Very Useful information on E-insurance.

    Naduvilmadam

    7 years ago

    There appears to be a clear cut case for payment on interest on monthly basis as interest is charged on loans and advances on monthly basis. By applying the same yardstick it is anybody's guess why interest is not paid monthly

    manish wani

    7 years ago

    Why one more unique number? The AADHAR number should have been used for the unique identification and all policies could have been linked and stored in the repository under that number.
    This would have been one more incentive to have a AADHAR number. Henceforth, for any such activity one option should be to link to AADHAR number till the time that everybody gets it and after that it should be the only number which should be used everywhere.

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