IRDA Brings Insurance Closer to Public in 2011

Preeti Kulkarni, ET Bureau Dec 28, 2011, 04.45am IST

Insurance policyholders will remember the year 2011 for the series of small steps taken by the Insurance Regulatory and Development Authority (IRDA) to protect their interests.

The measures may not have had the course-altering stature of the September 2010 Ulip charge cap, but they did nevertheless have significant impact from the policyholders' perspective. This apart, trends in the insurance space also left their imprints. A round-up of some of them:

LIFE INSURANCE

Advantage policyholders? 

Overall, life insurance policyholders did have plenty to cheer this year. "Unit-linked products have become less costly and more affordable for customers, the new pension guidelines ensure that the maturity benefit will have a guarantee of some sort embedded within the product," says TR Ramachandran, CEO, Aviva Life.

Agents feel the heat

For long, policyholders have complained about agents pushing life policies, particularly Ulips (unit-linked insurance policies), irrespective of whether they matched their needs or not. This year, the Insurance Regulatory and Development Authority (IRDA) decided to take some action to check this mis-selling menace by coming out with minimum persistency standards for agents to continue in the field.

"Customers can now look forward to being advised well and can look forward to continuing good service from the agent through the policy term. This is perhaps the most significant customer centric development for 2011 and will curb, if not eliminate, any scope of mis-selling," says Suresh Agarwal, executive vice-president at Kotak Life.

New pension Ulip norms out 

Insurance companies, barring a few, had stopped launching pension Ulips under the post-September 2010 regime, citing mandated return guarantee as the chief hurdle. IRDA has now decided to relax the norms and some insurers are upbeat about the same.

"The new norms will provide a fillip to the Ulip-based pension plans. This is extremely important in a country like India, where life expectancy is expected to go up, the joint family support system is giving way to nuclear families and social security is low. Pension is a huge market and the new guidelines will encourage insurers to provide the customers a wider choice in pensions of all types - Ulip as well as traditional," says AS Narayanan, chief distribution officer, Bajaj Allianz Life Insurance.

From policyholders' perspective, financial planners' advice is that they should consider other options like PPF, NPS and mutual funds too, before making a decision.

More flexibility to revive Ulips

November 1 onwards, policyholders were allowed to revive their discontinued Ulips. Until then, if you missed paying premiums, your policy would lapse. Now, however, you can revive your policy within a maximum of two years of last premium paid, provided it falls within the mandated lock-in period of five years.

Market sees new products, re-launches 

The shift towards endowment plans from Ulips continued this year and term plans, particularly online term insurance, gained popularity. Last year, the insurance regulator came out with norms on variable insurance plans after banning their previous avatar, that is, universal life plans.

Only LIC launched VIPs post the new regulations last year, but this year, SBI Life too threw its hat in the ring. This apart, the insurance space saw the introduction of Ulips that come with life-long cover, those with limited premium paying terms and others that carry zero-premium allocation charges.
Guaranteed Ulips face uncertain times

These popular, but complex, products were under the IRDA's scanner this year and the chances are that the fallout could be evident next year. The regulator's concern was that these highest NAV-guaranteed products could lead to miscommunication and customers may end up buying them without a thorough understanding of their workings.