The Insurance Regulatory and Development Authority (Irda) has disallowed sale of high-value unit-linked insurance products (Ulips) and variable insurance products over phone to curb mis-selling.
According to the regulator's new guidelines on distance marketing of insurance products, variable insurance products (VIPs), too, should not be solicited or sold over distance marketing mode. The new guidelines shall be applicable from Oct 1.
In case of variable insurance policy, a policyholder has the option to invest the bulk of the premium in one or more separate investment accounts like fixed-income investments, stocks, mutual funds, bonds, money market funds, etc, depending on his risk appetite.
"Insurers shall not solicit Ulips of non-single premium type for annualised premiums exceeding Rs 50,000 over telephonic mode (voice as well as SMS). Single premium Ulips shall not be solicited for a premium of more than Rs 1,00,000 over telephonic mode," Irda said.
According to the guidelines, distance marketing includes every activity of solicitation and sale of insurance products through voice mode (telemarketing), SMS, electronic mode, which includes e-mail, internet and interactive television, physical mode like direct postal mail, newspaper and magazines.
The regulator said insurance brokers shall not exclusively promote the products of any particular insurer, and shall suggest the best available product in the market that fits the needs of the client.
In a bid to curb rampant mis-selling of products while soliciting, clients should be provided with up-to-date price comparison charts and suitable products under each category.
Similarly, insurers would not be allowed to pay brokers any extra remuneration other than brokerage.
"No payments by any name shall be made by insurers to brokers or their related parties towards infrastructure or any account other than brokerage on the policies solicited or procured over distance mode," Irda said.
An insurance company cannot deny an insurance cover, if a client approaches over distance mode.
"When a client approaches an insurer or broker over distance mode proposing for insurance cover, the latter are duty-bound to consider the case on merits and in accordance with regulatory directions and their own norms. In no case shall they resort to an unfair denial of cover to a client who seeks insurance," Irda said.
The regulator said in all instances where a policy was issued via distance mode, the policy bond should accompany the verbal transcript of the conversation between the client and the tele caller.
"Insurers shall forward a verbal transcript of the voice/electronic record of the queries raised and answers thereto on the basis of which the policy has been underwritten, along with the policy bond," it said.
"The tele caller and the authorised verifier shall ascertain if the client is interested in continuing with the subject, and the process of solicitation shall proceed further only on receiving the consent in explicit terms," Irda said.