In a bid to improve customer service in the insurance sector, the insurance regulator is planning to allow new agents to service orphan polices. Orphan policies are those policies where the original agent is not available for servicing, thereby resulting in non-payment of premiums.
The Insurance Regulatory and Development Authority (Irda), in the draft guidelines on servicing orphan policies, has recommended insurance companies have an option to designate another agent for servicing such policies. In such cases, the new agent would be entitled to full commission according to the original policy document.
Also, the policies allotted for services shall not be counted for persistency of the agent.
"Policies in which premium is due and are unpaid even after six months of the due date, will be considered for allotting to new agents. Insurance companies are allowed to allot any of the lapsed and orphan life insurance policies to individual agents whose licence is in force for the purpose of conservation and rendering effective service to the policyholders," Irda said.
Irda has been concerned with the lapse ratio in the Indian life insurance industry. It is much higher in case of orphan policies.
According to Irda data, the lapse ratio for the life insurance industry stood close to 20 per cent, way higher than the expected levels of 10 per cent.
"Termination of agency, quite rampant in the industry, has rendered millions of policies 'orphan'. Orphan policies are prone to neglect, due to the lack of follow-up/servicing support and are known to lapse in large numbers," the report said and pointed out that in the era of multi-channel," Irda had said in its annual report.
Recently, the number of orphan polices has increased, as slowdown in the life insurance industry had taken a toll on individual agents.
According to data collected by Life Insurance Council, around 331,000 agents went out of business during the April-December period, resulting in 34 per cent drop in new premium collection from agency channels. Premiums collected by selling new policies by agents in the same period stood at Rs 31,500 crore, compared with Rs 47,500 crore collected in the same period a year ago. Total number of individual agents as on December 31, 2011 stood at 2.38 million, compared to 2.71 million last year.
In the same period, total premium collected by the life insurance sector, which includes the new business premium and renewal premium, was down three per cent to Rs 1,80,240 crore from Rs 1,86,396 crore. This was largely due to the 17 per cent decline in the first year or new premium collection during the first nine months of the financial year.
The Insurance Regulatory and Development Authority (Irda), in the draft guidelines on servicing orphan policies, has recommended insurance companies have an option to designate another agent for servicing such policies. In such cases, the new agent would be entitled to full commission according to the original policy document.
Also, the policies allotted for services shall not be counted for persistency of the agent.
"Policies in which premium is due and are unpaid even after six months of the due date, will be considered for allotting to new agents. Insurance companies are allowed to allot any of the lapsed and orphan life insurance policies to individual agents whose licence is in force for the purpose of conservation and rendering effective service to the policyholders," Irda said.
Irda has been concerned with the lapse ratio in the Indian life insurance industry. It is much higher in case of orphan policies.
According to Irda data, the lapse ratio for the life insurance industry stood close to 20 per cent, way higher than the expected levels of 10 per cent.
"Termination of agency, quite rampant in the industry, has rendered millions of policies 'orphan'. Orphan policies are prone to neglect, due to the lack of follow-up/servicing support and are known to lapse in large numbers," the report said and pointed out that in the era of multi-channel," Irda had said in its annual report.
Recently, the number of orphan polices has increased, as slowdown in the life insurance industry had taken a toll on individual agents.
According to data collected by Life Insurance Council, around 331,000 agents went out of business during the April-December period, resulting in 34 per cent drop in new premium collection from agency channels. Premiums collected by selling new policies by agents in the same period stood at Rs 31,500 crore, compared with Rs 47,500 crore collected in the same period a year ago. Total number of individual agents as on December 31, 2011 stood at 2.38 million, compared to 2.71 million last year.
In the same period, total premium collected by the life insurance sector, which includes the new business premium and renewal premium, was down three per cent to Rs 1,80,240 crore from Rs 1,86,396 crore. This was largely due to the 17 per cent decline in the first year or new premium collection during the first nine months of the financial year.
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