1. IRDA drafting bancassurance guidelines
India’s insurance industry watchdog, Insurance Regulatory & Development Authority (IRDA), is working on a set of guidelines for bancassurance that will enable insurers to pass on savings achieved through using the bank distribution channel, reports The Economic Times citing a senior official at the regulator 

Confused over buying the right unit-linked policy?

Well you are not the only one. It is really confusing when you have to compare the offerings of the 22-odd life insurance companies in the market.
While insurers pitch unit-linked policies as the hottest and most transparent plans, most policyholders grapple to get acquainted to terminology of plans from different insurance companies.

So much so, the Life Insurance Council has taken up the issue with the Insurance Regulatory and Development Authority (Irda).

“We are looking at standardisation of nomenclature used by insurance companies and also a uniform method of calculating charges by companies,” S B Mathur, ex-LIC chairman and secretary general, Life Insurance Council, told DNA Money.

“Customers get confused to see charges in plans being called by different names. For example, some use the term ‘fund management’ charge, some call it net asset value (NAV) charge, while some others brand it as ‘policy maintenance charge’ or policy administrative charge.

This creates confusion for customers as they compare similar products,” Mathur said. “We are saying, if the charge is for management of funds it should be called fund management charge. The method of calculation should also be standardised. Some calculate these charges on the basis of sum assured, while some on the NAV,” he added.

The council has said that there should be one or two methods so that it makes it easier for the customer to compare the loads.
While the regulator is still to take a decision on these, Irda actuary R Kannan said, “There is a need to enhance transparency in the operation of insurance companies so that policyholders make informed decisions.
Moreover, to consolidate the benefits, we must inculcate and enhance the confidence of both current and prospective policyholders.”

The Life Insurance Council is also working on a host of other issues. “We are dealing with taxation and compliance issues including KYC norms,” Mathur said.

Expensive as they appear, it is sometimes better to go for individual policies for the whole family

Today, there is increased awareness about healthcare costs and how mediclaim insurance helps mitigate the risk of such costs. One question for the first time buyer is whether to take individual insurance polices for each family member or a family floater policy.

Before we look at the pros and cons of the various types of mediclaim policies available, let us quickly look at what each of these policies means.
An individual policy means a separate policy for each of the family members. That means, if in a family of three members, each of the family member is covered for Rs 2 lakh, then eligible hospitalisation expenses incurred up to that limit for that particular individual only would be reimbursed.

In contrast, in a family floater plan, the limit can be utilised by any of the family member. If the same family takes a family floater plan for Rs 4 lakh and say eligible expenses incurred for one of the members was Rs 3 lakh, it will be fully reimbursed. So, in many ways, the family floater plan offers flexibility in terms of utilising the overall insurance coverage among the family as a group.

This would seem to indicate that a floater plan is always more beneficial for a family. However, there are several other considerations that need to be taken into account before taking this decision. We have used some examples to understand this better.

We then tried to find out the value of a family floater policy that they will get for about the same amount of premium. And we found that the older family would be able to get a family floater plan for Rs 4 lakh at almost the same cost (Rs 13,092 as compared with Rs 13,106 for the individual policies). The younger family fares much better with a family floater policy of Rs 5 lakh available at a much lower cost (Rs 6,998 instead of Rs 7,776 for individual policies).

As can be seen, for the older family, for the same amount of premium, the family floater plan doubles the amount available for each family member (Rs 4 lakh from Rs 2 lakh) while halving the overall family cover (Rs 4 lakh from Rs 8 lakh). For the younger family, on the other hand, the flexibility is increased dramatically (Rs 5 lakh from Rs 2 lakh) without a significant impact on the overall family cover (Rs 5 lakh from Rs 6 lakh) and with money saved to boot.

The reason for this is not far to seek. The family floater plans are priced on the basis of the age of the senior most member and as he/ she gets older, the flexibility decreases and/ or the cost increases significantly.

There are other disadvantages to a family floater policy as well. The policy will be renewed only till the senior most member reaches the maximum age of renewability allowed by that company. As it stands today, at that stage, the other family members will need to take a fresh policy without having the benefit of their claim history and pre-existing disease coverage that comes from continuous renewal of the policy.

The same applies to children who reach the maximum age (normally 25 years in most cases) after which they will need to buy a separate policy for themselves without the benefit of the earlier continuous coverage that they have got under the family floater policy. Most policies also make no specific provision for continuing cover of the surviving members in case of the unfortunate death of the senior most member.

All in all, since continuous coverage and claim history is critical in this category and currently there does not seem to be any stated basis for taking these with you when you are forced out of a family floater plan, we would strongly recommend taking individual policies for the whole family.

The writer is CEO, ApnaInsurance.