Renewal clause in agent licence likely, says Irda

19-Jul-2010

In order to rein in mis-selling of insurance products by agents, insurance regulator has proposed that an agent's licence may not be renewed where the persistency ratio (policy renewal ratio) is less than 50%. In an exposure draft on persistency of life insurance policies, Insurance Regulatory and Development Authority (IRDA) has suggested that agents should sell a minimum of 20 polices per year and a minimum first year premium income of Rs 1,50,000. The IRDA data show that over 50% policies of many life insurers could not be renewed in FY10. "There are several causes for the decline in persistency that are linked to agents. The primary one is mis-selling," the regulator said in its draft note. "It's a welcome step, it would further ensure that there is no misselling of products," said SB Mathur secretary general Life Insurance Council. As per the regulator's exposure draft there shall be a disincentive for lapses in the form of commission clawback by the insurer, on a proportionate basis.

Source : www.insuremagic.com