IRDA wants clarity, simplicity in insurance product sales
05 June 2010
In a bid to ensure that consumers do not end up being confused or taken for a ride by unit-linked insurance plans (ULIPS) sellers, regulator Insurance Regulatory Development Authority (IRDA) has directed insurers to provide a `key-features' document with each policy. The document will outline in clear, easy to understand terms the salient features of the product being sold to policyholders.
A new provision will also be incorporated in the `Regulations for Protection of Policyholders Interests' to make this mandatory for insurance companies.
As of now, the only explanatory document available to policy holders is a benefit illustration that details the returns policyholders could expect on maturity.
The proposed document will contain the necessary information that will spell out the type of policy, minimum surrender value, list of complaint centres, benefits of the policy as well as benefits not payable, among others.
According to the regulator, the risks involved and the obligations, etc, will be explained in the document. Numerous cases of unscrupulous agents selling regular premium policies (where commissions are higher) as single-premium plans have come to light.
According to an IRDA communiqué issued to all life insurance firms, ''A key feature document should not be too long as to lose the precision nor should it be too short thereby missing out on key facts. The document should avoid jargon, should be easy to read and most of all be attractive for the consumer to peruse. It should be titled prominently and should use easy-to-understand language.''