ET Bureau MUMBAI: Stung by the strong negative perception against unit-linked insurance policies (Ulips) created by complaints of rampant mis-selling in the past, several life insurers are taking measures to pre-empt such grievances and nip them in the bud.
In an attempt to stymie future complaints and safeguard their reputation, life insurers like SBI Life, IDBI Federal and IndiaFirst Life have started making calls to their policyholders to enquire whether they have understood the policy terms and conditions before issuing the policies. These 'pre-issuance' calls are made even before the policy is issued and the mandatory 15-day free-look period clause, which allows policyholders to cancel the policy and claim refund of premium, comes into play.
"This year, we sold 11.3 lakh policies, out of which 9.5 lakh went through this call process to confirm whether policyholders had understood the terms and conditions or not," said Arijit Basu, managing director and CEO, SBI Life.
Companies are also carrying out an internal suitability analysis, in addition to need analysis that is part of the standard proposal form prescribed by the insurance regulator. "We will evaluate whether the prospective policyholder can afford the product like banks ascertain whether you can afford EMI or not. Also, in case of potentially vulnerable customers - say those aged over 50 or 60 - we call them to explain product workings and ask them if they are aware of the terms and conditions," said RM Vishakha, managing director and CEO, IndiaFirst Life Insurance.
Ulips had gained notoriety following large-scale complaints against distributors who pushed these products on the back of exorbitant commissions. In 2010, mis-selling complaints and turf war with markets regulator Securities and Exchange Board of India (SEBI) over regulation of Ulips prompted the Insurance Regulatory and Development Authority of India (IRDAI) to issue sweeping guidelines, including capping Ulip commissions and other charges.
Industry-watchers feel that regaining the dented customer confidence is among the key challenges the life insurance sector is facing at present. "The customer has to be at the centre of insurers' universe. However, many life insurers had moved away from this principle and were focussed on pampering the distributors instead. Only now have some insurers started placing emphasis on customers' interests," said Anuraag Sunder, managing consultant, financial services, PwC India.
To assure customers on their commitment to claim settlement, IDBI Federal and Max Life offer a claim guarantee - that is, claim processing within 8-10 days, failing which, the policyholder is paid penal interest for the period of delay. "We pay customers 8% interest for every day of delay (in claim settlement). This is not going to increase our top-line, but sends the message to existing customers that we value them," said Vighnesh Shahane, whole-time director and CEO, IDBI Federal Life Insurance.
In an attempt to stymie future complaints and safeguard their reputation, life insurers like SBI Life, IDBI Federal and IndiaFirst Life have started making calls to their policyholders to enquire whether they have understood the policy terms and conditions before issuing the policies. These 'pre-issuance' calls are made even before the policy is issued and the mandatory 15-day free-look period clause, which allows policyholders to cancel the policy and claim refund of premium, comes into play.
"This year, we sold 11.3 lakh policies, out of which 9.5 lakh went through this call process to confirm whether policyholders had understood the terms and conditions or not," said Arijit Basu, managing director and CEO, SBI Life.
Companies are also carrying out an internal suitability analysis, in addition to need analysis that is part of the standard proposal form prescribed by the insurance regulator. "We will evaluate whether the prospective policyholder can afford the product like banks ascertain whether you can afford EMI or not. Also, in case of potentially vulnerable customers - say those aged over 50 or 60 - we call them to explain product workings and ask them if they are aware of the terms and conditions," said RM Vishakha, managing director and CEO, IndiaFirst Life Insurance.
Ulips had gained notoriety following large-scale complaints against distributors who pushed these products on the back of exorbitant commissions. In 2010, mis-selling complaints and turf war with markets regulator Securities and Exchange Board of India (SEBI) over regulation of Ulips prompted the Insurance Regulatory and Development Authority of India (IRDAI) to issue sweeping guidelines, including capping Ulip commissions and other charges.
Industry-watchers feel that regaining the dented customer confidence is among the key challenges the life insurance sector is facing at present. "The customer has to be at the centre of insurers' universe. However, many life insurers had moved away from this principle and were focussed on pampering the distributors instead. Only now have some insurers started placing emphasis on customers' interests," said Anuraag Sunder, managing consultant, financial services, PwC India.
To assure customers on their commitment to claim settlement, IDBI Federal and Max Life offer a claim guarantee - that is, claim processing within 8-10 days, failing which, the policyholder is paid penal interest for the period of delay. "We pay customers 8% interest for every day of delay (in claim settlement). This is not going to increase our top-line, but sends the message to existing customers that we value them," said Vighnesh Shahane, whole-time director and CEO, IDBI Federal Life Insurance.
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