Insurance cos to watch each other

MUMBAI: Irregularities in linked insurance plans seems a key issue for the life insurance industry these days.
Last week, Insurance Regulatory and Development Authority (IRDA) chairman CS Rao said some measures to curb the practice like cutting agent's commissions on unit linked products (ULIPs), asking agents and customers to sign illustrations given out by the company to ensure that customers had full knowledge of the investment he was making, were being considered.
Now at the council level (the Life Insurance Council consists of members who are the heads of insurance companies), the are turning watchdogs for each other.
It has been decided that companies will keep track of each other's market practices and bring any deviations with sufficient proof to the notice of the council secretary general. The sceretary general will then take up the issue with each CEO. The head of each company will be given adequate time to take corrective steps and will have to get back to the secretary general with a report of the measures undertaken.
As per IRDA norms companies are allowed to show illustrations for ULIPs using only two rates of return - 6% and 10% - both considered reasonable rates considering the long term nature of the product. However, agents in their zeal to sell more have been handing out pamphlets with illustrations showing returns of 50-60% in some cases which misleads customers.
Life Insurance Council secretary general SV Mony told TOI, "Already such cases have been pointed out against three-four companies and I have taken up the matter with the CEOs. So far the response has been positive. A system has been put in place for self regulation and it should help us bring the market practices in line with the acceptable code of conduct."
Although Mony would not reveal names of companies pulled up, he said it was a mix of private and public sector players.
Last year, the regulator had issued guidelines asking companies for better and standardised disclosures on various paramters like terminology, risk factors and charges.
In his speech Rao said, "In spite of these guidelines, there are complaints that there is mis-selling of products and agents promise returns far in excess of what is permitted to be stated and non-disclosure relating to risks that policyholders have to bear."