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Irdai’s push for digitization makes buying life insurance policy easier


In a bid to make the purchase of term plans easier and to solve the problem of issuing physical policies amid covid-19, Irdai this week brought in a few changes as to how life insurance policies can be bought and issued.

“Term plans are simple and easy to understand. This combined with the fact that it’s prudent to take one step at a time could be the reason to restrict the dispensing of physical signatures to only term products,” said Rushabh Gandhi, deputy CEO, IndiaFirst Life Insurance Co Ltd. We tell you what the changes are what they mean for you.

E-consent of proposals

In its circular, Irdai said for life insurers, the situation arising in the wake of covid-19 has impacted the traditional means of canvassing policies by agents and other intermediaries. Filling of physical proposal forms, obtaining wet signatures and the subsequent movement of physical papers has been affected.

The agency model of selling has been face-to-face where the agent would go meet the customer and either the agent or the customer would fill the details in the proposal form, sign it and send it to the insurer for issuing the policy.

“With covid-19, customers are apprehensive about meeting anyone in person. While we could capture the details for the proposal form over a phone call or a video call, getting the signature has been a challenge,” said Anil PM, head-legal and compliance, Bajaj Allianz Life Insurance Co. Ltd.

To solve this, insurers suggested having a digital system in place to authenticate the details by way of one-time password (OTP) verification or by sending a link to the customer, which can be used as a replacement for wet signatures.

Life insurers have now been allowed to obtain customer’s consent without requiring signatures on the hard copy of the proposal forms. Insurers will have to send you the completed proposal form on your registered e-mail ID or mobile number in the form of an e-mail or message link.

If you wish to consent to the proposal, you will have to click on the confirmation link to validate the OTP shared with you. The regulator has asked insurers to maintain verifiable and legally valid evidence for the proposer’s consent received on the fully completed proposal form.

“Insurers will need to have a mechanism in place to trigger the OTP or sharing of the link. The regulator wants us to have a mechanism in place for the customer to key in the acknowledgement and for us to store this in case any issue (or conflict) arises in the future,” said Anil.

Also, insurers are not allowed to accept any payment towards proposal deposit till the proposer has given her consent. “Generally, customers give a cheque with the completed proposal form which comes to the insurer. Now customers are not required to pay the premium until they’ve accepted or given their consent to the proposal,” added Anil. Agents and intermediaries are required to certify the authenticity of e-mail ID and mobile number of the proposer.

The regulator said insurers will be responsible for carrying out pre-issuance verification calls for all such prospects and ensuring the suitability of the product being purchased. For now, Irdai has allowed this on an experimental basis till 31 December.

“Most of the term business already happens through online modes. This circular will make a difference for insurers who are selling term through the offline mode. It makes the process simpler, and if it works, the regulator may expand the timeline and the scope to other products as well,” said Gandhi.

Issuance of e-policies

According to the Irdai circular, life insurers have expressed difficulty in printing and dispatching of policy documents, which has given way to adopting digital modes of doing business. Insurers can now send all life insurance policies electronically to the policyholder’s e-mail ID. In 2016, Irdai had said that if policies are solicited through an electronic mode, insurers were required to send the policy electronically and also dispatch a hard copy. Exemption for a physical copy was provided only where the policy was issued using an e-insurance account (eIA).

“This requirement (of eIA) has now been done away with. We can now send the PDF of the policy bond over an e-mail. Insurers are not mandated to send the physical policy,” said Anil.

Insurers said they are unable to send the policy contracts on time due to the pandemic and the free-look period starts once the customer receives the policy documents. Therefore, the free-look period ran for much longer than 15 days.

Further, the free-look period—duration during which a policyholder can terminate the policy without any penalty—has now been increased to 30 days from the date of receipt of the electronic policy. “This is to give the customer some extra time to go through the policy. Also, customers can now return the policy electronically. They could just write an e-mail instead of returning the contract either in person or through courier,” said Gandhi.

Insurers shall confirm the date of receipt of the e-policy through a call or other means and preserve the proof so that the free-look period can be calculated from that date.

What it means for you

Physical policies are not mandatory now if the insurer has obtained the consent of the policyholder. Insurers will now save on costs, which could be put to better use.

“A digital onboarding process will result in the reduction of operational cost of processing the policy and the saved cost can be reinvested in enhancing the customer experience,” said Gandhi. This could also remove the ambiguity and help insurers and customers connect directly with increased transparency.

Insurers said the simplification of the purchase process may encourage more people to buy life insurance who had been procrastinating as the purchase until now was a relatively lengthy process.

Anil said this move was the need of the hour as digital is the new normal. “Like everything else, you can now access the insurance bond also through your phone. It gels in well.”

A percentage of policy bonds, which were dispatched always came back due to various reasons. The electronic issuance will help solve this problem and policyholders will receive the policy much faster.

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