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Insurance regulator gets strict on orphan policies

What are orphan insurance policies ? These are policies where the agent who sold these policies has shifter to another company, and the person who bought these policies no longer has an agent or an intermediary to help service them. This is a common problem in the life insurance business, since:
– An agent will do anything to sell a policy, including using charm, threatening about the problems that could occur later in life if you don’t have an insurance policy, using contacts, etc. The agent gets a good commission when the insurance policy is sold, but the amount of commission is drastically reduced in subsequent years, which leaves little incentive for the agent to remain and service the needs of the insurance buyer. If another company offers a better deal, the agent will move.
How can there be a solution that also helps the insurance buyer ? Well, the IRDA (insurance regulator) is making it more difficult for agents to shift so very easily, adding a set of conditions and rules (link to article):

In A bid to ensure that fewer policies get lapsed, the Insurance Regulatory and Development Authority of India (Irda) has made it tougher for agents to shift loyalties . The new agency guidelines ensure that all agents—individuals , corporate as well as banks—continue to sell policies of the same insurance company for at least three years. Historically, lapse ratio has been higher among orphan policies when compared with policies that are serviced by an agent. To ensure that an agent shifting loyalties does not leave behind orphan policies, the insurance regulator has put in a number of preconditions that the agent has to fulfil before he can obtain a no-objection certificate from his principal.
To take care of the policies orphaned by agents, Irda said, life insurers should ensure alternate arrangement, and these measures should go beyond a call centre facility, which is also an essential requirement . Insurance companies have been asked to intimate each policyholder that their agent has quit and there are alternate arrangements being made to service them.

2 comments to Insurance regulator gets strict on orphan policies

  • Jatin Khan

    Hi! I think it’s a good step taken by the IRDA . But I think that companies must take steps in this regard I think that companies must launch some tools like this which can help people to plan their insurance & buy insurace without any agent. Have a look 🙂

  • prashanth, kannur

    IRDA treating agents as slaves of Insurance Companies. If one agent becomes MDRT in an year failed to soarce new business in the succeeding year, company may not pay renewal commission to him. IRDA remine duff and blind.
    If one customer fails to pay renewal premium due to genuine reason, some companies (ie. HDFC Standard Life) charge claw back of commission from Agent.
    If one Agent transfer from one company to an other, the earlier company may not permit him to access the data of his earlier customer and pay no commission on renewal. IRDA also supportin for not to pay it. This makes his earlier policies orphan.

    Best suggession to reduce orphan policies is making Insurance Agents independant to sell products of any Insurance Company as the Mutual Fund Agents selling funds and direct the companies to pay renewal commissions to the insurance agents If he support the customer to pay it. IRDA can permit the customer to shift his policy from one company to an other, if he think that may give him better service.

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