To protect the long-term interests of life insurance policyholders, the Insurance Regulatory and Development Authority (IRDA) has made it mandatory for agents to provide full details in a transparent manner before persuading policyholders to shift to another life insurance firm. The draft underscores that no life insurance agent, insurance intermediary or an insurer is permitted to replace a life insurance policy, except, if it is in the interest of the policyholder.
The guidelines floated by the insurance regulator, which tightens replacement norms that would help retain the existing life insurance policy, envisages full disclosure and transparent information to the policyholder to avoid a possible misrepresentation as to the factual position of financial consequences of replacing an existing life insurance policy.
These guidelines, charted out by the insurance watchdog, seeks to discourage intermediaries from persuading lapsing, surrendering or making paid-up of an existing life insurance policy with the intent of canvassing or soliciting a new life insurance policy on the same life. It is framed with an aim to encourage fair market conduct and fair business practices amongst life insurers and insurance intermediaries.
According to the regulator, replacement, if required, would be subject to certain conditions, including obtaining a written consent from the prospect for replacing existing policies. Besides this, there also will be requirement to obtain the particulars of all existing life insurance contracts of the prospect and details of those policies that are proposed to be replaced. Additionally, other condition would include submission of the proposal form to the insurer (new insurer) replacing the existing life policy contracts after the expiry of 15 days from the date of notifying the insurer (old insurer) whose policies are proposed to be replaced, among other things.