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Insurance Regulatory and Development Authority of India (IRDAI) has implemented stricter advertising norms for insurance companies. It has issued a draft of new guidelines related to advertisements by both life and general insurers.

The new norms will bring in transparency for buyers and could also reduce mis-selling of insurance.

“Evolutionary trends in advertisements in the last 20 years coupled with technological developments which have changed the medium of advertising thereby necessitating the review of existing advertisements regulations," stated the draft of the regulations.

The new regulations focus on clarity and simplicity of communication, covers digital promotions, and also agents and intermediaries.

UNFAIR AND MISLEADING ADS

The key focus is on the unfair or misleading advertisement, and IRDAI has comprehensively defined it. If insurers claim beyond the ability of the policy to deliver, it will be considered as misleading. The advertisement should cover reasonable expectation of performance and benefits that match the policy provisions.

IRDAI doesn’t want insurers to hide behind the wordplay and it would consider an advertisement misleading when the benefits in a policy are not guaranteed but the insurer does not explicitly say so, or advertises in a manner that the consumer is unable to understand that benefits are not guaranteed. The same applies in case an insurer uses words or phrases in a way which hides the cost of the risks covered in the policy.

Insurers will also need to disclose important exclusions, limitations, and conditions of the contract in their promotional material.

Life insurance companies usually sell their products based on the sense of security. The regulator has said that the use of terms or phrases that convey a fabricated sense of security will be considered as misleading and unfair advertisement.

All insurance companies are now required to have a compliance officer that will ensure that advertisements and promotions comply with the regulations. The officer will need to file a copy of all advertisements and maintain specimens of all advertisements for at least three years.

INTERMEDIARIES ARE ALSO COVERED

Insurance companies and intermediaries will be required to publish advertisements that are clear and not misleading. The regulator wants insurers, agents and intermediaries to clearly state that the ad is for an insurance product.

If a company is selling unit-linked investment plan (Ulip) or pension plan, it can talk about the investment benefits but would need to clearly inform customers about the underlying insurance element in it.

If an agent is issuing an advertisement, it must now obtain written approval from the insurer. Without this, agents or intermediaries cannot advertise their partners’ products.

Websites of insurers, agents, and intermediaries will need to show the full text of the relevant key features of the policy and also the terms and conditions. No important information should be hidden in smaller fonts or body of the text.

The regulator wants to implement strict guidelines about ratings, rankings and awards. Insurers or their affiliates cannot come up with rankings themselves or hire an independent agency to get an award.

The regulations also state that insurers and intermediaries cannot advertise their position based on any criteria in their advertisements. It means, insurers cannot talk about the number of policies they have sold, the number of branches they have or the premium income they have earned.

Due to technology, the way promotions and advertisements are done has changed. These are the much-needed steps that would make buying insurance policy less complicated for consumers.

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