Opinion | Review the insurance document, verify agent’s credentials before buying3 min read . Updated: 29 Jul 2020, 09:36 PM IST
You can also write to the insurer’s support or helpdesk sites to clarify doubts
Every once in a while, someone in our company gets an email from my official account asking them to immediately transfer money to a third-party bank account. These are phishing emails, where someone impersonates me, to steal. Cybercrimes have increased during the lockdown. Recently, 130 Twitter accounts of prominent personalities were hacked and about $120,000 stolen. Not all crimes are digital though. Last year a friend’s health claim was rejected for non-disclosure because a sales team had hidden his ill health from the insurer.
Insurance buyers often describe unkept promises. In life insurance, the most common are the promise of a high return, 15% or more; the assurance that only a few premiums need be paid; the understanding that in a pension plan, funds can be withdrawn at will; and a guarantee that buying insurance makes you eligible for a loan. In health insurance, the broken promises are that pre-existing health conditions are covered immediately even if not declared; and all continuity benefits have been protected when you bought a new insurance.
The broken promises would be fewer if buyers verified information more diligently. There are many regulatory safeguards and diligence is easy. The main diligence document in life insurance is the sales illustration. It is mandatory for insurers to have you sign this and send a copy with your policy. The illustration lists out your premium payments over the years and outlines possible returns. The interest rate range that these illustrations generally show is 4% and 8%. Since these are the returns that the insurer earns, your returns will be lower. The 4% and 8% band is carefully selected to set reasonable expectations. A promise of higher return is not credible. This illustration also details out the fund amount that you can withdraw each year.
In health insurance, the main documents to review are the proposal form and your policy itself. Both will be sent by the insurer as standard practice. The proposal form outlines the information that has been shared with the insurer by the sales person or you; and this information has formed the basis of underwriting. Any verbal discussion beyond this form is not considered. The policy has details of continuity benefits, dates of birth recorded and pre-existing conditions that have been noted. These two documents let you know if the insurer is aware of your pre-existing health conditions and if your waiting periods are over.
Some buyers would like to get more detail about an insurer. Specifically, their claim settlement, complaint and grievance rates, and financial strength. These can be determined from public disclosures that each insurer publishes quarterly on its websites. Life insurers’ form L-22, on analytical ratios in public disclosure has the insurer’s performance on sales, net worth, persistency and investment returns. Forms L-39 to 41 have excellent information on claims and grievances. For health insurance, the equivalent forms to read are NL-24, 25, 30 and 41.
To verify the credentials of the person selling you insurance, find out if they are an individual agent, web aggregator, corporate agent, broker or some other approved entity. Ask for an ID if you can and communication from their official emails. Insurers put up a list of terminated agents on their websites. And, the insurance regulator publishes the list of active corporate agents, brokers, web aggregators and other distributors on its website (irdai.gov.in). Other reliable sources of information are policyholder.gov.in for policyholder information; gicouncil.in, the General Insurance Council’s website; lifeinscouncil.org, the life insurance counterpart; and ibai.org, the insurance brokers’ association website.
Another good practice is to drop a message to the insurers’ support and helpdesk sites, to clarify any of your doubts. They will respond but even if they do not, the fact that you shared your understanding with the insurer will be useful if there is a dispute.
Also, insurers make a welcome call in many cases after you have bought an insurance policy. This is another opportunity for you to clarify. I have seen situations where the welcome caller clarified and customer acknowledged that the insurance was no guarantee of a loan. Yet a few months later, the customer complained of a broken promise.
More direct questioning, insistence on written responses and your own research through verified sources will prevent surprises.
Kapil Mehta is co-founder, SecureNow