The Insurance Regulatory and Development Authority of India or IRDAI for short is responsible for regulating the working of insurance companies in India. Since its inception, the IRDAI has been constantly working hard to improve the quality of finance in India.
They were responsible for the remarkable change of foreign direct investment limits from 49 percent to 100 percent very recently. The second time last year, IRDAI has made news was when they slapped a Rs 20 Lakh fine on Birla Sun Life Insurance late last year.
Here’s why the fine was slapped and the implication of the fine on policy buyers of the company.
Why the Fine?
Birla Sun Life, a popular insurance company had been found to directly violate some of the very clear rules laid by the IRDAI. Here are the rules that were violated by Birla Sun Life-
1. There is a clear prohibition on giving insurance agents and brokers bonuses such as foreign trips and gift cards. Birla Sun Life had been found guilty of doing exactly that. During inspections, the company admitted to providing foreign trips and gift cards worth a whopping Rs 380 lakhs to its employees. This deed was done during 2011 to 2012.
2. The next offence was for disregarding File And Use guidelines. While the guidelines are more esoteric in nature, the File and Use guidelines have something to do with-
- Keeping up to the tariffs set by the government and not charging anything more
- The quality of product and service should have a good minimum standard.
- All language regarding insurance policies must be clear and comprehensive, so as to eliminate the chances of denying payouts by citing literature.
- The product should be genuine.
- The insurer should make sure that he does not cut rates just to keep up with the competition.
The Final Order drafted towards this news states that there was a delay in making the refund of initial premium to the policy holders wherein policy holders complained of mis-selling. While it only goes against the second point of the guidelines, it tells volumes about the type and quality of service at Birla Sun Life Insurance.
Another observation made was that some claims hadn’t been settled for over 180 days.
3. The third charge was towards disobeying regulations with regards to premium collection of Unit-linked insurance plans (ULIP).
4. Another charge was found towards the engagement of a business mentor in life insurance dealings.
What Does This Mean For Potential Buyers And Old Customers?
The minds of potential buyers have probably already been dissuaded from buying this life insurance policy, and rightly so.
It was observed by the IRDAI that some life insurance claims hadn’t even been settled for more than 180 days owing to non-completion of investigation.
All these violations come after a previous violation in 2014 regarding similar non-payment of money owed.
This absolutely ruins the trust of customers towards this this company. It will obviously be safer to go towards companies with higher rates of claim settlements and payouts, even if the company now has changed its ways. No degree of low premiums matter if the customer does not get paid at the time of need.
To be honest, the insurance policies provided by this company are really great. With minimum sum assured of up to Rs 50,00,000 and maximum sum assured of up to Rs 5,00,00,00,000, and a maximum tenure of up to 30 years, insurance policies usually tend to not get better than this.
For existing customers of the plan, it is best to get out of the policy for now(unless you have problems that counter-indicate getting out of an insurance policy). The process is simple and the forms for policy cancellation and partial withdrawal form are available online.
It will take a lot of effort by the company to make us go back to buying life insurance policies from this company. Don’t get us wrong, apart from some of the mis-handled cases, Birla Sun Life actually has a good number of claims settled and payouts made. But in places where large amounts of money is involved, it is always better to be safe than sorry.