Kathmandu. Currently, in order to meet their goals in India, bank employees often sell life insurance products to customers who cannot pay premiums from the second year. Failure to pay the premium makes life insurance worthless and they also lose the amount paid in the first year.
The new proposal by the Insurance Regulatory and Development Authority of India (IRDAI) prohibits the sale of any insurance product without providing detailed information and customer approval.
According to the Reserve Bank of India (RBI) rules, mis-selling of insurance can also lead to action against bank employees. In fact, in rural and small towns, bank employees often sell life insurance to less educated people when they open bank accounts or provide loans.
Many banks like SBI, Kotak, HDFC and ICICI also run their own insurance companies. Since domestic products carry high margins, banks also act as distributors to sell their own products. However, banks will not be able to indulge in such mis-selling after the new proposal of the insurance regulator comes into force.
IRDAI has already proposed to limit the commission of insurance distributors. Currently, distributors get more than 25 percent commission in the first year when selling life insurance. According to the new proposal, it can be reduced to 10 percent.
Insurance distributors will be the most affected by IRDAI’s new proposal. There will be no impact on the margins of insurance companies. Agent commission has been reduced by five percent but distributor commission has been proposed to be reduced by half.
Distributors work for many companies at the same time. Therefore, IRDAI believes that it will not affect their income but will definitely provide relief to the customer while buying insurance.
IRDAI aims to bring all citizens of India under insurance coverage by 2047. To achieve this goal, it is necessary to reduce the cost of insurance.
IRDAI’s proposal is a step in this direction and will benefit the customer without harming the insurance companies. However, the distributors will definitely be affected.
According to IRDAI, insurance companies do not disclose the complete details of their products. If a customer wants to compare the same type of product from different companies, then they should provide complete information.
There is no mention of distributor and agent commission at the time of sale of the product. IRDAI has proposed new rules to make insurance sales transparent and affordable for customers and has sought consultation from all stakeholders by October 25. – Agency
