IRDAI directs insurance companies to clarify risks in market-linked insurance plans

In a recent circular, the Insurance Regulatory and Development Authority of India (IRDAI) has directed Life insurance companies to refrain from advertising unit-linked plans as investment products. The regulator emphasized that unit-linked or index-linked insurance products should not be marketed as such, and instead, the risks associated with these products must be clearly disclosed to consumers.

Furthermore, insurance companies are now required to explicitly state that market-linked insurance plans differ from traditional endowment policies and come with inherent risks. Additionally, participating endowment policies with bonuses must disclose that the projected bonuses in benefit illustrations are not guaranteed.

To enhance transparency and protect policyholders’ interests, IRDAI has mandated that the advertisement committee of the company or a senior-level officer of the distribution channel must review and approve all advertisements to ensure they are not misleading. Moreover, policyholders can now access information on unclaimed amounts with any insurer through the Bima Bharosa portal.

Unclaimed Life insurance funds, which include unclaimed death or survival benefits, will be consolidated on the portal along with individual insurers’ websites. This initiative aims to streamline the process of accessing unclaimed funds and promote greater transparency within the insurance sector.

In addition, IRDAI has instructed insurance companies to establish a tech-based robust mechanism for grievance redressal to ensure efficient and speedy resolution of policyholders’ complaints. The regulator is pushing for a “zero grievances” goal, encouraging insurers to address issues promptly and enhance customer interactions and awareness.

Shashi Kant Dahuja, Executive Director and Chief Underwriting Officer at Shriram General Insurance, commended the government’s efforts to hold insurers accountable and improve customer service standards. He highlighted the importance of resolving grievances promptly and efficiently to enhance customer satisfaction.

Insurers are also required to establish regular customer interfaces, run awareness campaigns, facilitate online grievance submissions, and ensure the registration of all complaints. Additionally, companies must strengthen their resolution processes with internal escalation matrices and Internal Ombudsman Schemes to address unresolved grievances effectively.

Furthermore, IRDAI has permitted insurance companies to outsource activities only if they are cost-effective and efficient in serving customers. These outsourced activities will be overseen by a committee established by the board to ensure compliance with regulatory standards.

Overall, these regulatory measures aim to promote transparency, protect policyholders’ interests, and enhance customer service standards within the insurance industry. By implementing these guidelines, insurers can build trust with consumers and ensure a fair and efficient insurance market.