IRDA seeks to bring parity among products of various life insurers
The Insurance Regulatory and Development Authority (IRDA) will come out with product designing guidelines for life insurance companies within a month.
The move is aimed at helping protect consumer interest by preventing mis-selling of life insurance, said Mr S. Roy Chowdhury, Member (Life), IRDA. This will also bring parity among products offered by various insurers.
The insurance regulator has set up a product design committee which has representatives from the industry. The IRDA has also circulated draft guidelines to initiate discussions, according to industry sources.
Some of the proposals in the draft include: maintaining minimum premium payment term at five years; capping the maximum commission that can be charged for the first year and subsequent years; and phasing out products guaranteeing highest NAV.
The guideline defines minimum death benefit applicable in the case of participating (wherein policyholders are entitled to a share in the profits or surplus) and non-participating (wherein the returns are guaranteed and benefits disclosed upfront) products.
The proposal suggests ‘par' products to be offered only on non-linked platform and ‘non-par' on traditional or unit-linked platforms. It also outlines the ways for accrual and payout of benefits under such products.
Focus on tech aspects
According to Mr Rituraj Bhattacharya, Head – Product Development and Market Management, Bajaj Allianz Life Insurance, most of these guidelines focus on the technical aspects of product designing in order to bring some parity among the products offered by various insurers.
“We are not looking at micromanagement, however we plan to put in place certain broad guidelines to determine how products should be developed with a view to help customers,” Mr Chowdhury said.
According to Mr Yateesh Srivastava, Chief Marketing Officer, Aegon Religare Life Insurance, the IRDA has also proposed setting up of a product suitability matrix. This matrix “will prescribe certain documentation and selling methods,” he said.
The IRDA is also looking at introducing a comprehensive unified proposal form to streamline systems and processes, Mr Chowdhury said.