For your protection…..

 

You bought a policy in 2007 for a sum assured of Rs. 25 lakhs. You have paid premia for 2007, 8, 9, and 2010 by cheque. You paid the premium for 2011 by cash. Great, the policy is in force.

In Jan 2012 you die.

The family sees the policy and calls the agent. Sorry agent is no longer picking up the phone number which you have. You do not know what to do.

So you go to the life insurance company and say….”Mr. S died on ….” please pay the claim.

The company says …’Sorry the premium was not paid, and hence, the policy was Cancelled’.

What does the family do?

They search for the receipt – and of course they cannot find it (record keeping by Indians is pathetic esp if they are born after 1945)…..

Believe me, as of now there is NOTHING to say that such a thing cannot happen. You have no protection.

Once upon a time companies had to maintain a physical record of the policies issued. Now even if it is maintained it WILL BE ELECTRONIC. These records can of course be manipulated….so what do you do? Twiddle your thumb.

Is there a solution? yes from IRDA’s side the solution is simple, the Register of Members should be audited regularly and the Electronic copy should be kept with IRDA on a weekly basis. Cancellation, modification, etc. should be filed separately and proper processes and forms should be maintained.

Is there an even simpler solution? yes of course, dematerialise the policies. If I have a policy – term, endowment, medical…I should be able to hold it in electronic form. Simple. I will be able to access it any time….and there will be a third party affirmation of the policy.

What will the Industry say to this?

OMG our costs will go up.

OMG you are increasing our work load

Why do you need it? after all in the MF industry it is optional is it not?

Proof that the policy has been issued is available with the client no? why does he need more proof?

Will it happen? You know my views about the regulators, right? So the answer is right. NO. I do not think it will happen, well at least not in my life time (2025 circa)….

IS THERE A SIMPLE SOLUTION?

YES. Write a letter to the life insurance company saying you want a letter saying that all the due premia has been paid, it is a policy in action….and there are no dues outstanding against the policy.

Who should do it? when you are alive it is YOU – the company only recognizes YOU.

Is it a dangerous situation? the answer is yes……

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10 Responses to “For your protection…..”

  1. Excellent Input Sir.THANK YOU VERY MUCH.Also doing an ECS in an account and always maintaining sufficient liquidity in that account will help in smooth execution and Proff Remains in Pass Book .Also communicating with family after each Paid Premium through ECS certainly keep them Updated …..and above all learning Post 45 Era …Keeping a file and Faithfully Punching each receipt needs to be learn for our era ,so also communicating Location of such file.Easier said than Done ! Thank You sir

  2. Milind N on October 27th, 2012 at 8:13 am
    Excellent Input Sir.THANK YOU VERY MUCH.Also doing an ECS in an account and always maintaining sufficient liquidity in that account will help in smooth execution and Proff Remains in Pass Book .Also communicating with family after each Paid Premium through ECS certainly keep them Updated …..and above all learning Pre 45 Era …Keeping a file and Faithfully Punching each receipt needs to be learn for our era ,so also communicating Location of such file.Easier said than Done ! Thank You sir

  3. Nice Article Subra, some where i read even for medical insurance claims one has to submit premium paid receipt for the last minimum three years..Its a really tough situation , when we r not in a position to roam around and recovering after discharge to maintain these things will be quite difficult….for what purpose these rules r framed,to reject claim or poor database maintained by insurer…

  4. write a letter every year!!!

  5. Is it possible to show account statement if cheque payment is done ?Can family not use this to prove that premium is paid ?

  6. premium paid in CASH read first para

  7. Nice Article on one of very critical financial trouble. I have a doubt in the second last para regarding issuance of letter to Company. Who will issue this letter. Mr. S who purchased the policy or the person who is claim the sum assured and When ?? Please reply

  8. We all know the open day light robbery which is happening in hospitals which has only increased in the recent past, but we are not talking about this fraud.

    The medical expenses are increasing day by day and it is beyond the reach of mangoman these days. Many mangomen are insuring themselves to avoid cost. Now the doctors ( Indians are very innovative and unique) started charging more (mostly unnecessary treatments only to rip him off) for the people who are insured.. Ultimately it iis loss to the insurance companies. Unfortunately the insurance idiots are not realizing that. Now who is going to take this on? Another side effect is, once you get used to high costs they costs will be charged to non-insured also.

    On second thoughts, I also cannot say insurance guys are idiots. They will just increase the insurance premium for next year. So ulitmately sufferer is mangaman. That is YOU and ME. A treatment to cataract costs 16K last year is 24 K this year. Imagine the kind of money the hospitals are making.

    Long live India. Jai Hind.

  9. Subra

    Why are you so pessimistic on your longlevity (2025 circa – thats only 12 years to go). As we like to say in India tum jiyo hazaaro saal, saal main din ho pachas hazaar 🙂 🙂 .

    More seriously I think dematting policies will bring down the costs for the Insurance companies and therefore it is likely to happen. Whether it is desirable or not – only time will tell ….

    NSEL is teaching us that not all paper is what it claims to be …..

  10. harsh roongta spent too much time in the equity markets, so I do not like predicting, especially if it is about the future 🙂

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