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Life insurance in India gained momentum since the entry of private insurance companies. Currently there are 23 life insurance companies that are operational in the country which includes 22 private life insurance companies and LIC of India. Life insurance products that cater to different needs of a customer include plans like Term Insurance Plan, Endowment Plan, Money-back plan, Pension Plan, Unit-linked Insurance Plan (ULIP), Child Plan etc.

All the private and public insurance companies in India are governed by the Insurance Regulatory and Development Authority (IRDA). Each year, IRDA’s grievance cell receives thousands of complaints from customers. Here is a look at all life insurance complaints received during 2009-2010.

Total number of complaints received against life insurance companies was 2,449, out of which 606 complaints were directed against LIC of India and 1,843 against the private insurers.

The insurance authority directs such complaints to a special division of the insurance company for resolution. Respective insurance companies have to take necessary steps to resolve each and every complaint. Post resolution, there were 150 outstanding complaints against LIC and 245 complaints against private insurers (as of March 31, 2009).

Poor service, inadequate coverage, bad claim settlement experience - if you are not happy with your existing health insurance company or policy, then the good news for you is that you can ditch your health insurer for a new one. Health insurance portability is here and you do not need to continue with your health insurance company just because you fear losing the accumulated benefits.

Health insurance policies and companies differ from each other in a lot of ways. Some insurance companies offer better policy features or services than their counterparts. There are companies which go to great lengths to design better products, offer excellent service that make a customer feel like a king. Select insurers have shunned TPAs and devised their in-house teams to effectively manage claims. TPAs are third party administrators who are outsourced to work as an intermediary between the insurer and the policyholder. The benefit of this is that the customer directly interacts with his or her insurance company at the time of making a claim.

Attractive Health Insurance Plans

Innovative and unique plans have hit the markets in recent times which offer a wider and better coverage than the old, vanilla plans. For instance Star Health Insurance has a policy for diabetic patients called Diabetes Safe, another breakthrough policy for HIV/AIDS patients. A policy for HIV/AIDS patients was unheard of, as other companies listed it under their exhaustive list of exclusions. There was a time when no policy would cover non-allopathic treatments, but now there are unique health plans available which cover Ayurvedic, Homeopathic, Naturopathy and such treatments. Pregnancy and maternity expenses were an exclusion and most insurers would not provide a cover for this; but some new plans have coverage for these too.

Until recently, it was not possible to cover all members of a family under one health insurance policy. But thanks to the efforts of some insurance companies, there are new plans available in the markets that let you cover not just your immediate family members but also your extended family members like grandparents, grandchildren, in-laws etc in one single policy. Max Bupa Family First is one such policy wherein you can cover up to 13 extended family members.

Pre-existing disease coverage is a big concern for customers who have suffered some medical condition in the past. Most health insurance companies have a waiting period of 48 months, i.e 4 long years before they cover pre-existing ailments. A few of them have a 36 month waiting period. Star Unique Insurance Policy shines brilliantly in comparison with these other policies as it has reduced the waiting period to only 11 months.

There are unique policies which now cover expenses like cost of spectacles, hearing aids etc. Earlier health insurance policies had a maximum age limit for renewal capped at 60 or 65 years. New plans from companies like Apollo Health Insurance, Max Bupa Health Insurance offer guaranteed lifelong renewability. The premiums for innovative plans may be a little higher but the variety of coverage offered is extremely attractive.

Health Insurance Portability a boon

With such an extensive list of new and unique health insurance plans, existing policyholders may find other policies better suited to their needs. Claim settlement ratio, service standards and multiple other factors could also be a reason for some policyholders to have the desire to switch over to another insurance company.

In such a scenario health insurance portability by IRDA comes as a blessing. You can now port a policy without losing out on the benefits earned. These benefits could be the no claim bonus or the credit earned on pre-existing disease earned in your old policy. For instance, you have already served 2 year waiting period on your old policy and now want to move to a new policy which has a waiting period of 3 years; in this case you will only have to wait for another 1 year before the new company covers your per-existing conditions. Your no-claim bonus will also be transferred to the new policy.

If you have a Group Health Insurance Policy, you can port it to an individual health policy as well.

Words of caution!

• Don’t just jump to another policy without assessing your needs completely
• Have a valid reason for switching to a new company
• Read the terms & conditions and exclusion list carefully

The grass always looks greener on the other side but reality may be completely different from illusions. You have the power to make your own decisions, so use it wisely.

Did you know that there is an Insurance Ombudsman for protecting the interests of policyholders? The Ombudsman was set up in 1998 by the Government of India. The offices of the insurance ombudsman are located across 12 cities (1) Bhopal, (2) Bhubaneswar, (3) Cochin, (4) Chennai, (5) Chandigarh, (6) New Delhi, (7) Guwahati, (8) Kolkata, (9) Ahmedabad, (10) Lucknow, (11) Mumbai and (12) Hyderabad. Refer to the list below for the contact details.

There is a dedicated committee comprising chairman of IRDA, LIC, GIC and a representative of the Central Government. This committee recommends appointment of the insurance ombudsman to the governing body of insurance council. The Ombudsman has a secretarial staff to assist him; and their expenses are incurred by member insurance companies of the insurance council. The purpose of the Ombudsman is to address the policyholders’ grievances and to mitigate their problems quickly and fairly. This council is of great importance as it has helped to generate the confidence and faith amongst policyholders and insurance companies.

The Ombudsman performs two main functions. One is conciliation by way of bringing the disputing parties to an agreement. The other function is award-making. The awards passed by the ombudsman must be honored by the insurance companies within three months. Consumers can make complaints regarding (1) dispute with regard to premium paid or payable, (2) dispute on the legal construction of the policy wordings in case such dispute relates to claims, (3) delay in settlement of claims, (4) non-issuance of any insurance document to customers after receipt of premium, (5) partial or total denial of claims by the insurance companies, etc.

The complaint should be made in writing and addressed to insurance ombudsman only after he has already:
1) Made a representation to the insurer named in the complaint and, the insurer has either rejected the complaint or the complainant has not received any reply within a period of one month; or he is not satisfied with the reply of the insurer.

2) The complaint is not made later than one year after the insurer had replied.

3) The same complaint should not be pending in any court, consumer forum or arbitrator.

If the policyholder is not satisfied with the order passed by the ombudsman, he can further approach other venues like consumer forums and courts of law for redressal of his grievances.

The insurance ombudsman can be approached for both Life Insurance and Non-Life Insurance related issues

List of Insurance Ombudsman offices and jurisdiction: 

Reliance Life Insurance Company has been slapped with a fine of Rs. 10 lakhs by the insurance regulator in India, IRDA.

Reliance life insurance was hauled up for a variety of reasons but was fined only on 2 counts which include paying excessive referral fees and selling policies which have not been approved by IRDA. Reliance Life was fined Rs. 5 lakhs for each of these issues. The amount of referral fees that can be paid to insurance distributors are clearly define by IRDA and life insurance companies need to strictly follow these guidelines. Also every life insurance policy has to get the prior approval of IRDA before it can be sold by any life insurance company.

There were some other issues also for which IRDA has issued a warning to Reliance Life but has stayed away from a fine as they were first time occurrences. These include opening of branches without the approval of IRDA, outsourcing of key jobs which are not permitted and for not issuing licenses in a timely manner.

The President of Reliance Life, Mr Malay Ghosh had appeared in person for sharing its stand to IRDA.

Highest NAV guaranteed products were the flavour of the season in the last couple of months – and it continues to be so. These products are Unit Linked Insurance Plans or ULIPs in which the insurance company guarantees the customer the highest NAV which the policy has achieved in the entire term of the plan.

On paper these schemes sound very attractive as customer as the customer is enticed by the highest NAV clause. In reality, the life insurance companies would ensure that the NAVs do not rise dramatically because they would then need to pay the customer basis that high NAV when the policy matures. So they would invest substantial amounts into debt instruments which give low but fixed returns. So these products should not be expected to do as well as equity oriented schemes. But these facts are not really part of the documentation.

There are some positives to these plans also. To get the highest NAV, the customer would need to remain invested till the maturity time of the product. So it forces the customer to a long term product, which as an insurance plan is a good thing.

IRDA has asked 2 life insurance companies on the need for such products. This came up as the 2 life insurance companies had sent their highest NAV products for approval to IRDA. Some of the old highest NAV schemes have been very successful as was the case of LIC’s wealth plus scheme.

It remains to be seen, if IRDA approves the plans from these new insurers.

September 2010 was almost like a new era for life insurance business in India. The lucrative commissions which were being paid to life insurance middle men got reduced slightly. Ulips were made much more customer friendly and aligned more towards a life insurance product with increase coverage levels. The lock-in period was ULIP was also increased.

While all this was great for the customer, not all participants have benefited from it. Life insurance companies had to pause and take a hard look at how business was being sourced. The internal cost structures needed to have a close and hard look. Expenses had to be controlled and payouts needed to be reduced. While most life insurance companies would be impacted in the short run, the fact that Ulips have become more customer friendly will result in more sales in the longer run.

It may not be the same for the distributors though. Companies which were relying largely on sale of only Unit Linked Insurance Plans have taken a hit. The drop in commissions means that the distributors would have to almost double their productivity if not more. Now that does not come easy. HTMT has confirmed that they had to shut their insurance sourcing business as it was no more lucrative enough to do the same. Some 300 employees had to be re-settled to other processes because this line of business was no more attractive enough from a business point of view.

There are some pains which the industry would go through. But in the long run, life insurance companies will evolve and move to sustainable sourcing channels.

A customer friendly move is always a good move!

Last six months have seen quick and decisive actions from the insurance regulator in India. In yet another move to ensure consumer confidence, IRDA banned the sale of Universal Life Policies from today.

This action was taken by IRDA after a lot of customer complaints were received by the regulator with regards to universal life policies. More...

New business acquisition for life insurance companies was never going to be the same as it was before September 2010. The premium collections have confirmed the same. Most life insurance companies have seen a drop in their business as compared to August 2010 – and that too a considerable drop.

The industry put together, saw the new business at half the levels – dropping from Rs.18,500 crores to Rs.9,613 crores. This was more or less on expected lines, in fact it could be considered to be better than what most people feared. With low charges and insurance agent commission being tightly regulated, the life insurance industry was expecting a worse show. Majority of the private life insurers were too focussed on selling the super-lucrative ULIP and when the new norms were announced, a lot of the insurance companies were taken by surprise.

Gradually we will see more focus from life insurance companies on traditional products also. So far most of the insurers had more or less shunned the traditional products and was going full on with sale of ULIPs only. In fact these stringent norms were put in place because they was rampant mis-selling which forced the regulator to act in the consumer’s interest and specify strict norms on sale of ULIPs.

The biggest drop in business was witnessed by Aegon Religare followed by Bharti Axa, Sahara and Aviva life insurance companies.

September 2010 was the toughest months and surely the life insurance companies will bounce back with more plans and aggressive distribution techniques.

Good luck!