Irda advises insurers to simplify policy terms and conditions

Speaking at 13th Insurance Summit organised by the industry body CII, Insurance Regulatory Development Authority Chairman J Hari Narayan also said the watchdog will soon come out with norms for universal policies-- a Ulip-like product in which a part of the premium is set aside for covering life risk.

Observing that one way for deep market penetration is making the policy documents and contracts comprehensible to laymen, he asked the insurers to simplify their policy documents by de-jargonising the contractual terms and conditions.

"There is absolutely no need for so much jargonised policy documents and contractual notes for most of the insurance products available in the country today. Therefore, I feel that the insurers could and should simplify the language in which their policy documents and contracts are stated," Narayan said.

Plain vanilla products should also have plain contracts and if policy documents are stated and explained in simple language, it can be a big leveler in reaching out to more uninsured sections of the society, he said. "Of course, complicated or hybrid products can have complicated policy documents too," he added.

Another way to help penetrate the market better is to have different agent licences for selling different products. "This will not only better professionalise agents but also help them sell in a more targeted manner."

He further noted that the best way to reach the market is to let a policy be purchased and not sold, as is being done now. Narayan also hinted at limiting banks, which are into bancassurance, to certain geographies, which he feels will help them sell better. It has been found that since one bank sells products from different insurers, there is less effective sales, he said. So far, non-bank channels are doing much better jobs on the sales front, he added.

On telemarketing norms, which demands insurers to record the conversation with a customer and maintain it for records in case the customer feels that he/she was misled by the tele marketing agent, Narayan said such a system will not only help bring down mis-selling but also bring about more responsible agents in the industry.

On the imperative need to bring down the cost of operations, he had suggested that the regulator was looking at allowing the companies to outsource certain processes.
However, he clarified that "there is no order in this regard, but we are looking at this (outsourcing non-core processes) as one of the ways to reduce costs of companies. This is only at a preliminary stage of discussions and we are will be meeting the industry on this and come out with an answer. "

Another way to cut down on cost is strengthening and sharing the market information system, he said. Narayan further said as the industry moves forward under the new regulatory regime, the Irda will be strengthening the ombudsman regime too.