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Life Insurance: What has changed during the year and how it affects you

The Insurance Regulatory and Development Authority of India’s (IRDAI) primary aim is to prevent the mis-selling of products. Keeping up with its objective this year, IRDAI has announced a slew of changes to the non-linked as well as linked products offered by the Life Insurance Companies in India. Let’s have a look at how these changes would affect the policyholders and prospective buyers.

The Insurance Regulatory and Development Authority of India’s (IRDAI) primary aim is to prevent the mis-selling of products. Keeping up with its objective this year, IRDAI has announced a slew of changes to the non-linked as well as linked products offered by the Life Insurance Companies in India. Let’s have a look at how these changes would affect the policyholders and prospective buyers.

Recently, the Insurance Regulatory and Development Authority of India (IRDAI) has further simplified both traditional and unit-linked insurance products (ULIP) products offered by life insurers. These changes are going to impact life insurance products like term, endowment, ULIP and pension plans, and will end up becoming more beneficial to the customers at large.

These changes can be broken down into three parts: suitability information, product structure and pension plans. Let’s take a look at the changes that have taken place.

 Changes in the pre-application process requiring suitability information: Under this directive, life insurance companies, agents, and intermediaries are to collect suitability information like age, income, family status, life stage, financial goals and insurance plans already bought. This information has to be collected from every prospective buyer and then only can a product recommendation be made. This directive will not apply to pure term and pure health insurance products ..

For ULIPs, there should be a clear indication of how the premium paid is utilised towards charges or from the fund balance, and the balance fund at the end of the first year and subsequent years.

This is an important step because if the customer’s background, goals and expectations are not understood, the perfect plan and right fund allocation cannot be advised by agents or intermediaries. The regulator has made the right decision in making it mandatory for insurers and intermediaries to first understand the customer’s profile, and his needs and goals, before advising any specific investment plan to them.

 

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