It is almost as if you can see the conflict: there is the desire to do the right thing by the customer, but the DNA of an institution that does not believe in consumer rights comes in the way. The insurance regulator is torn with this dichotomy, of watching its capital market counterpart take giant strides in investor protection and disclosures, wanting to do the same, but not being able to. Insurance industry insiders say that the Insurance Regulatory and Development Authority of India (Irdai) chairman is keen to bring about change in favour of the consumer but is hampered by the tight ring of bureaucracy of a PSU monopoly mindset that thrived in a supply-starved market of the 1970s of a socialist India.
Two moves that should have brought accolades need to do much more in policyholder interest, but are good announcements of a regulator beginning to think about customers rather than agents, brokers and firms. One, the idea of a standard term life cover that can be bought off the shelf with standard features and no frills. Each insurance firm from 1 January 2021 will have to launch a standard pure term (only insurance cover, no investment) cover called Saral Jeevan Beema (read the circular here: bit.ly/37I6ii8). Great move, but it is unclear why there is a ₹25 lakh upper limit for the sum assured, and then the asterisk that firms can offer more cover if they like. It seems that firms will have to offer a cover of up to ₹25 lakh and can offer a higher one if they choose to. Pure covers have a rule of thumb of 10 times your income. So, an income of ₹2.5 lakh a year will need a ₹25 lakh cover. To me it looks like a carve out for insurance firms so that they don’t really have to offer a policy to the market that is actually buying term covers—those covers are of a much higher value— ₹50 lakh or more.