Insurance Regulator Fines HDFC Standard Life for Claims Delay

Source : IANS, Friday, 07 October 2011, 09:19 IST  


Chennai: India's insurance regulator Wednesday imposed a fine of 500,000 on Mumbai-based private life insurer HDFC Standard Life Insurance Company Ltd for not having in place effective procedures to comply with regulations and delaying settlement of a death claim.


The Insurance Regulatory and Development Authority (IRDA) also directed HDFC Standard Life to "...put in place effective claim settlement procedures and take all such measures that deem fit for both pro-active and timely settlement of all types of claims".


HDFC Standard Life has to confirm to IRDA within 15 days the action taken to comply with the IRDA (Protection of Policyholders' Interests) Regulations.


The IRDA order came on a complaint lodged by Kunti Devi against HDFC Standard Life with IRDA for non-settlement of claim April 14, 2009.


IRDA, in turn, forwarded the complaint to the company July 29, 2009.


Nearly six months later, HDFC Standard Life informed about the repudiation of the claim on the grounds of concealing material facts.


Perusing the records, IRDA said the claim was repudiated 12 months after it was lodged and on investigation, the regulator found the timeline followed by HDFC Standard Life to decide on death claim is on the higher side.


The regulator also found during its investigation that HDFC Standard Life has been sitting on the admissibility of individual death claims for more than six months and in the case of a group insurance policy, one claim is outstanding for more than a year.


During a personal hearing, HDFC Standard Life's CEO Amitabh Chaudhary submitted to IRDA that the company has reduced the turnaround time for death claims from 34 days in 2009-10 to 26 days in 2010-11 and 86.35 percent of the investigated claims are settled within that time.


According to IRDA, life insurers have to initiate and complete claims investigation within six months from the date of lodging of a claim.


The insurer should pay or dispute the claim, giving reasons within 30 days of getting relevant papers and clarifications, it said. 

Insurers to call you after policy sales

Source : FC: Sneha Shah May 30 2010 , Mumbai

Soon, life and general insurance companies will have to call up individuals to whom policies are sold by telemarketers to confirm the sale before issuing the policy document.

Insurance Regulatory and Development Authority (Irda) is in the process of formulating telemarketing guidelines, which are expected to be announced by next month, a senior Irda official said.

According to him, the guidelines aim to curb rising cases of mis-selling among life and general insurance companies, where the policy details are not explained to customers before selling. “Often, policies that are sold to people, do not match their requirements and income and they lapse. That is why the rate of policy lapsing is high,” the official said.

The guidelines will ask companies to follow a set format of questions before trying to sell a policy over phone. In case an agent sells a policy personally, the terms and conditions have to be reiterated to the buyer over phone after the application reaches the insurer.

There are three aspects of telemarketing in case of life and general insurance companies. First, when the policy is solicited and the entire process is done over the phone. Second, when an agent has sold a policy, it needs to be reconfirmed with a call. And third, when travel and motor insurance policies are sold bundled with other products such as a credit card or car, the customer has to made fully aware what she is getting into. “We will ask insurance companies to record and preserve call details until the end of the contract,” the official said.

Customers will now be asked about their eligibility, income and needs over the phone again before completing the sales process. Companies such as Aegon Religare Life, Star Union Daiichi Life, among others, are already following the post sale call process. Irda will now make it mandatory for all companies to follow.

Irda is also mulling a proposal to allow only trained personnel to sell insurance policies over phone. “Discussions are on whether to allow only insurance companies and their trained agents to do telemarketing or to allow third parties to do it. In the second case, the telemarketer has to be a trained agent,” official said.

In developed markets such as the US and the UK, telemarketing is prevalent, but the process is not regulated. Irda has requested the South Korean regulator, the only market where telemarketing guidelines are in place, to send its templates for analysis.

Irda tightens norms for referral agencies

SOURCE :BS Reporter / Mumbai May 19, 2010, 0:16 IST

To regulate non-banking entities acting as referral agents in the life insurance space, the Insurance Regulatory and Development Authority (Irda) has capped the referral fee paid to this channel.

Irda said as insurers were following several different practices, this was resulting in high cost of acquisition, pushing up premiums for policyholders.


“Referrals are increasing the already spiralling costs of insurers. Therefore, in the interest of prevention of further escalation of costs, it is important to streamline the fee structures allowed to these entities,” Irda said.

At present, the whole area of referral arrangements with non-banking entities, including individuals, is not regulated.

“This will also prevent multi-level agencies from entry into selling insurance products that do not follow any code of conduct. This will encourage transparency in the system,” said an Irda official.

Irda said referral fee should be paid only on successful conversion, with a linkage to sale by the company’s sales person and such fees. Other costs incurred should not exceed the ceilings on commissions. Commission on pure term plans goes up to 35 per cent, whereas on unit-linked insurance plans (Ulips), the commission paid is around 7.5 per cent and for Ulip life cover it goes as high as 40 per cent.

As per the recommendations of the Govardhan Committee, the regulator proposed a minimum networth of Rs 50 lakh for referral agents and a turnover of at least Rs 1 crore for the last three consecutive years. Also, the company should not have total income from its referral business with an insurance company or any other organisation, more than 10 per cent of its total income in any year.

Murky cover: Chain-selling of insurance products thrives despite IRDA restrictions

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 Source:ML:May19,2010

In the absence of any clear-cut guidelines from the regulator or the government, insurance products are being sold under MLM schemes 

Insurance products are being sold under multi-level marketing (MLM) schemes by constantly luring unaware clients. However, the regulator, the Insurance Regulatory and Development Authority (IRDA), is busy fighting a turf war with market regulator Securities and Exchange Board of India (SEBI), giving a free hand to these dubious, fly-by-night operators.

In the absence of any clear-cut guidelines from the insurance regulator or the government, MLM schemes are being used to peddle insurance. IRDA, the industry association and the government don’t seem to have the time to look into these murky chain-marketing schemes.

According to Section (42) of the Insurance Act, 1938, appointing sub-agents and passing on commission or kickbacks is prohibited. In an email to Moneylife, IRDA's executive director A Giridhar said, “Selling insurance through unlicensed persons is illegal and we will act on the information provided by you.” In addition, IRDA certification is mandatory for selling insurance products.

However, peddlers of MLM schemes in insurance products are coming up with new ways to cover up their shady activities. One such company is Team Life Care Co India Pvt Ltd, a corporate agent of Bajaj Allianz Life Insurance Company Ltd. (read more http://www.moneylife.in/article/8/4821.html)

Despite clear evidence of an MLM scheme being used to sell its products, Bajaj Allianz denies the very existence of such operations. Santosh Balan, head, corporate communications, said, “Bajaj Allianz General Insurance solicits business only through approved and specified persons. All our agents are strictly advised to follow all regulations and procedures while soliciting business. If we find anyone violating any norm or regulations, we will take strict action against them."

There are two different views on using MLM to sell insurance products. While the regulator clearly says that selling insurance through unlicensed persons is illegal, the Life Insurance Council is not sure about it. Earlier, SB Mathur, secretary general of the Life Insurance Council told Moneylife, ”There are a couple of insurance companies that have a multi-level set-up, who have licensed agents and who use authorised people to sell products and some of them are doing a good job. But IRDA is quite alive to this and has recently taken some steps to ensure that MLM is not misused.”

“If there is an MLM structure where the company has a number of authorised representatives to sell insurance to people who are buying policies, then an MLM scheme could give strength of distribution. If there are no licensed representatives selling insurance, then it (the company) should be denied the right to sell. It is as simple as that,” said Mr Mathur, who is former chairman of the Life Insurance Corporation of India (LIC).
Here is seems that Mr Mathur, a veteran in insurance, is just looking at the ‘sales’ side of these MLM schemes. From his statement it appears that he may not be aware about the fraudulent ways in which an MLM scheme works.

All companies in the MLM field form a pyramid structure wherein the agent, business partner, distributor or salesman, whatever you call him, gets in new recruits, who in turn also recruits new people and it goes on to form a chain. Unfortunately, this chain structure is not a straight one. The new recruits are divided into binary or spill lines. Here the whole MLM edifice can come crumbling down.

For example, if you join an MLM scheme, you are required to get two more people under you. Similarly, these two people also have to recruit two people each under them and after that your structure becomes complete and you are eligible to receive some income.

However, in case one person from your team fails to recruit two people under his line then your structure remains incomplete and you may not receive a single penny as income. What is stunning is that depending on the MLM scheme, people who had joined under your line may be diverted to someone else’s line, if your line remains inactive or does not recruit more people. This is why so many people have lost or are losing huge amounts of money under MLM.

Moneylife has been writing on the rampant use of MLM for selling insurance products by insurers. Insurers like LIC, Bajaj Allianz, Reliance General Insurance or their agents are running MLM schemes for selling more policies.

Nevertheless, nobody except Bajaj Allianz bothered to reply to our mails until writing this story.
In addition, insurance companies are also targeting independent financial advisors (IFAs) with lucrative offers for referring their high net-worth clients for various insurance products. A few IFAs have told Moneylife that they would rather stay away from such proposals, as they value a long-term client relationship more than the prospect of a quick buck. 

Earlier writing in Sarai.net, S Ananth, who has been studying chain schemes in Andhra Pradesh, in an article titled ‘Harmless fraud’ says, “A clear-cut case of violation of the laws relates to schemes that distribute insurance policies on behalf of various private insurance companies. Any person desirous of marketing insurance policies has to pass an exam conducted by IRDA. Only corporate agents or brokers (registered with IRDA) are allowed to pay commissions.

Companies actively involved in marketing insurance schemes include TLC Insurance (India) Pvt Ltd (TLC), RMP and Amway, among others. These details indicate the nature of harmless fraud and also the frequent testing of the frontiers of economic law by such companies in order to gauge the reaction of the agencies of the State. The lack of reaction by State institutions, or even tacit approval, is likely to gradually lead to calls to formalise these activities at a future date.”

IRDA, whose job is to regulate the insurance sector, is saying that it is looking into MLM schemes used by insurance companies to promote sales. However, in practice, the regulator is turning a blind eye on MLM operators and insurance companies. Similarly, the industry association is not sure whether to call MLM unauthorised or not. Nevertheless, the way both MLM companies and insurers are operating, there are good chances that MLM in insurance may be legalised.

About a dozen countries have banned any kind of MLM scheme. However, in a country like India, in the absence of any clear policy and regulation, companies that can fix the system by roping in influential officials thrive and grow till complaints start flowing in. However, this happens only when the MLM scheme is getting ready to collapse. Whether the rampant selling of insurance through MLM will be banned or legalised in India, only time will tell.
 

Here’s another company that’s openly flouting IRDA norms on prohibition of chain marketing of insurance products

 Source: money life :Ravi Samalad:May 19,2010

You have to hand it to this company. The name itself—Rose Valley Chain Marketing System Ltd—makes it clear that the outfit is neck-deep in multi-level marketing schemes. And insurance is part of its arsenal.
The company, certified by the Insurance Regulatory & Development Authority (IRDA) is a corporate agent of the Life Insurance Corporation of India (LIC) since 2002 and has six lakh foot soldiers pushing various insurance policies across India.

Moneylife had reported earlier (http://www.moneylife.in/article/8/5371.html) on how according to Section (42) of the Insurance Act, 1938, appointing sub-agents and passing on commission or kickbacks is prohibited. When we had approached the insurance regulator on the proliferation of various MLM insurance schemes, along with the details, IRDA's executive director A Giridhar had told Moneylife, “Selling insurance through unlicensed persons is illegal and we will act on the information provided by you.” In addition, IRDA certification is mandatory for selling insurance products.

But here is an example of a company that does not even find it necessary to cloak its insurance MLM business—its name itself is a dead giveaway.
The model operates as follows—a sales executive has to achieve a target of Rs40,000 within 12 months. This is the joining stage. At the 18th rank, a sales executive ‘graduates’ to become a ‘Development Advisor Group 3’.
The products being peddled include LIC policies, along with fixed deposits and recurring deposits of Rose Valley.

A sales executive does not have to pass an IRDA examination, says an official from the company, which is in express violation of the rules.

The official from Rose Valley said, “Once you reach a certain level, you don’t have to work any more; you can earn commission bought by your chain.”
The brochure also says that a ‘marketing executive’ can also recruit a maximum of 15 sales executives.

At the first stage, the annual target is Rs40,000 and at the final stage (the 18th rank) the target is Rs20 crore. This target also includes the business achieved from the lower chain(s).

The group is a huge conglomerate with its finger in many pies. It has interests in real estate, hospitality, retail, broadcasting and IT education & training.
According to the company official, the group is also looking at entering the housing finance loan segment.

Insurance companies keen to grab client details of independent financial advisors

 Source :Moneylife :Aaron Rodrigues :May 17, 2010 06:53 PM

Insurance agencies are providing incentives to IFAs to get your contact details—everything from emails to cell phone numbers

You trust them with your money, you have faith in them as they will guide you to the right financial path, you believe in them as they are completely independent and loyal to their clients. These of course are your independent financial advisors (IFAs). However, we now learn that some of these IFAs are being wooed by insurance companies to part with your contact details.

Companies like Reliance, HDFC Life Insurance, SBI Life Insurance, Aviva Life insurance, Birla Sun Life Insurance and other insurance majors are understood to be inducing IFAs with incentives to get contact details of clients. These are either meant to locate new customers for unit-linked insurance plans (ULIPs) or, simply to poach customers from other insurers.

An IFA gets paid for his co-operation in providing other details of a competitor’s clients to an insurance company. All your details, right from your telephone numbers to email IDs, even residential addresses, are also provided to the insurance company.
This is all part of a desperate attempt by insurance companies to keep selling ULIPs after a very public brawl between the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) brought ULIPs sales down to a trickle. Thanks to that imbroglio, many ULIP customers are worried about their investments and are having second thoughts of continuing with premium payments for a product plagued by high default rates. Insurers are trying to reach out to existing and potential customers to dispel doubts and fears.

Secondly, insurance companies need to find other ways to bring in new customers. It is not clear whether they can launch new ULIP products before the courts pick the winner of the SEBI-IRDA fight; so they have to sell more to their existing customer base and need to interact with them directly. Or they have to incentivise IFAs to lure investors from other insurance companies.

“Insurance companies have often come to us to either sell their ULIPs or ask for our contact list in order to create a greater database to sell them directly to the clients,” said a certified financial planner who wished to remain anonymous. He calls this “a routine affair.”
These deals are obviously not done transparently. “There is no paper trail or a black-and-white agreement,” says Neeraj Bahal, a certified financial planner (CFP), from Fasttrack Investments. Usually, an executive from an insurance company would meet an IFA and tell him about a chance for him to make some money by parting with his clients’ details for a fee. Depending on the deal, the IFA will either part with the data which the insurer uses to contact a potential customer; or, in some cases, the insurance executive will actually accompany the IFA to client meetings to sell a product. This enhances the credibility of the insurance product being sold.

We learn that many IFAs who sold mutual fund products are tempted by the kickbacks from insurance companies after their business was hit by SEBI's ban on entry loads. "Since mutual fund commissions were dwindling and distributors were affected, it created an opportunity for the sales of ULIPs,” said Harish Mohan, managing director, Time Financials (Chennai).
Some distributors have a different perspective. Jayant Vidwans, president of the Society of Financial Planners said, "Sharing of data with various organisations is not wrong.”

Not all IFAs are jumping in to grab the money. “If he is a serious advisor then he shouldn’t be selling his clients’ details. He shouldn’t do that as this is his bread and butter,” says Sumeet Vaid, founder and managing director, Freedom Financial Planners.

The function of an IFA is to provide the best possible financial option for his clients. However, when an IFA’s conduct is influenced by incentives, he becomes just like any other insurance agent and clients’ interests are compromised.

You’ll get to switch insurers, retain benefits too

Source:13 May 2010, 0253 hrs IST,Debjoy Sengupta,ET Bureau
   


KOLKATA: Portability in health insurance is likely to become a reality soon. The General Insurance Council has recently submitted its revised format for portable health covers to the Insurance Regulatory & Development Authority (Irda). Insurers will be able to sell such health covers once the regulator has approved it. And policyholders will be able to switch their health cover providers with the same benefits retained once they have bought this cover.

Earlier, the council — a representative body of all general insurance companies — had submitted a model portable health cover with the regulator. But it did not find much favour with the regulator who had asked the Council to rework the insurance cover to include a wider section of individuals and offer increased coverage. Following the directive, the Council has increased the maximum age of entry for the policy from 40 years to 65. Sum assured for the policy was also enhanced from Rs 1 lakh to Rs 2 lakh.

Theoretically, a portable health insurance policy refers to the ability to switch health cover providers at will, yet retain bonuses accrued and have pre-existing diseases covered. Health insurance providers offer bonuses in the form of a reduced premium or increased covers with each claim-free year. After four years, pre-existing diseases also get covered. The earlier policy framed by the Council did not cover pre-existing diseases.

According to a source involved in the process, a Rs 1 lakh cover will be available at Rs 1,000 for an 18-year old. However, the premiums will be higher for higher age of entry.

Interestingly, to avail hassle free portability, one will have to buy this particular health cover. For other health products, insurers have the option of taking a call on a case-to-case basis.

However, for this policy, all insurers have to oblige in case the policy holder wants to switch companies.
Hence, in effect, it might mean that portability will be available when an individual buys this policy from any insurer. Which means that one may have to start afresh with the new standard policy. It will not have any accrued bonuses and will not cover pre-existing diseases from day one. Under this policy, bonuses will start accruing after a year and pre-existing diseases will be covered after four years.

It may be good news for individuals planning to buy a new cover, but senior citizens — those who bought their mediclaim policies long back, by virtue of which they enjoy bonuses and have pre-existing diseases covered — may not be excited.