Insurance regulator IRDA is asking Insurers to provide users with `key-features’. This will be a document that is to be attached with each policy so that they are in better position to understand the policy terms and conditions. There will be a new rider in the `Regulations for Protection of Policyholders Interests’ to make this mandatory for insurance companies.
Till date only, policyholder only received benefit illustration with the policy which shows the returns that they might expect at maturity. But now IRDA’s move would depict the type of the policy, minimum surrender value, and list of complaint centers, benefits of the policy as well as benefits not payable, among others in the open.
This planned document will show the risks concerned for the policyholder and the obligations or commitments required of him/her. The ulips controversy brought forth several complaints of unscrupulous agents selling regular premium policies (where commissions are higher) positioning them as single-premium plans.
To quote IRDA communiqué to all the life insurers :“A key feature document should not be too long as to lose the accuracy nor should it be too short thereby missing out on key facts. The document should avoid jargon, should be easy to read and most of all be attractive for the consumer to peruse. It should be titled prominently and should use easy-to-know language”.
Current scenario:
Buyers go through the life insurance policy—a contract document that is filled with legalese to understand the features of the policy. Outside India, especially UK, Regulators are instructing insurers to simplify the policy documents for easy comprehension by the prospective policyholders. Similarly, IRDA has approached insurers to draft policy documents in an easy-to-understand language.
The circular said, “It is observed that insurance policy documents are long and run into several pages, making it almost impossible for policyholders to read them. Contractual documents developed by insurance companies should take care of the interests of policyholders by giving them the required information in a clear and simple manner”.
The need for simplification: Even for an educated person understanding the legalities and the complexities of the key-features document is quite a task. To ensure that insurance companies do not work around these regulations and issue the key-features document in fine print, Irda has also prescribed the minimum font size for the document and provided a model document.
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