The year 2024 brought significant reforms for insurance policyholders in India, thanks to the Insurance Regulatory and Development Authority of India (IRDAI). These customer-centric changes have made insurance policies more flexible, transparent, and beneficial. While these updates primarily serve customers, they also present opportunities for insurance agents to better serve their clientele and grow their business.
Let’s delve into the 5 key changes introduced by IRDAI in 2024:
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1. Surrender Value Increased to 80% After Just One Year
Previously, policyholders had to wait at least two years to surrender an insurance policy. Even then, the refund was minimal, often subject to hefty penalties. IRDAI has now reduced this waiting period to one year, and the surrender value has been increased to 80% of the premiums paid.
Impact on Customers:
- Flexibility: Policyholders facing financial constraints can now access a significant portion of their funds without waiting for two years.
- Reduced Penalties: Earlier, surrendering a policy led to a considerable financial loss. With the revised terms, customers retain most of their investment.
Message for Agents: While this change may not seem favorable to agents, as it could encourage early surrenders, it serves as a powerful selling point. Agents can reassure clients about the improved liquidity and reduced financial risks associated with insurance policies.
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2. Reduction of Moratorium Period from 8 to 5 Years
The moratorium period—the time during which claims may not be entertained under specific conditions—has been reduced from eight years to five years.
Impact on Customers:
- Enhanced Confidence: Policyholders can now claim benefits earlier, boosting their trust in insurance products.
- Better Coverage: This change aligns with modern customers’ expectations of quicker access to financial protection.
Message for Agents: Highlighting this shorter moratorium period can be an excellent way to address customer concerns and drive sales.
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3. Maximum Waiting Period for Pre-existing Diseases Reduced to 3 Years
For health insurance policies, the waiting period for covering pre-existing diseases has been capped at three years. Previously, this period could extend up to four years, leaving customers without essential coverage for an extended time.
Impact on Customers:
- Faster Access to Benefits: Those with pre-existing conditions can now avail of insurance benefits sooner.
- Increased Inclusivity: The reduced waiting period makes health insurance a more attractive and accessible option for individuals with chronic conditions.
Message for Agents: Agents should emphasize the reduced waiting period as a key feature while pitching health insurance policies, particularly to customers with pre-existing conditions.
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4. Introduction of Electronic Insurance Accounts
Starting April 1, 2025, every insurance policy will be available in electronic format, similar to a demat account for financial securities. Customers will have a centralized account to manage all their insurance policies.
Impact on Customers:
- Convenience: Managing policies becomes simpler with a single account for all insurance-related activities.
- Eco-friendly Option: The electronic format reduces the dependency on physical documents, promoting a greener approach.
- Choice for Customers: Physical policy documents will still be available for those who prefer traditional formats.
Message for Agents: This feature not only showcases the modernization of the insurance industry but also helps agents connect with tech-savvy customers. Agents should guide their clients on how to set up and utilize electronic insurance accounts effectively.
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5. Simplified Policy Language
Insurance policies have often been criticized for their complex and technical language, making it difficult for customers to understand their terms and benefits. IRDAI has mandated insurers to simplify the language used in policy documents.
Impact on Customers:
- Improved Clarity: Customers can now easily understand the terms and conditions of their policies.
- Informed Decisions: Simplified language empowers policyholders to make better decisions regarding their financial planning.
Message for Agents: Simplified policy language reduces the need for extensive explanations, enabling agents to focus on addressing specific customer concerns and providing personalized solutions.
Why These Changes Matter for Agents and Customers
These reforms reflect IRDAI’s commitment to enhancing the insurance experience for customers. For agents, they present a dual-edged sword: while some changes, like the reduced waiting period for surrenders, may pose challenges, others, such as the electronic insurance accounts and simplified policy language, provide powerful tools to build trust and drive sales.
As the year progresses, agents should prioritize educating their clients about these changes. By doing so, they can position themselves as knowledgeable and customer-focused advisors, ultimately boosting their credibility and business prospects.
A Call to Action for 2025
With 2025 just around the corner, it’s time for agents to integrate these changes into their sales strategies. Whether it’s emphasizing the flexibility of surrender values, the reduced waiting periods, or the convenience of electronic policies, these reforms offer numerous talking points to engage with customers effectively.
Conclusion
In conclusion, these 5 changes are a win-win for everyone involved. Customers gain more control, transparency, and convenience, while agents get an opportunity to align their services with modern customer expectations. Let’s step into 2025 with these transformative updates, ensuring a brighter future for the insurance industry.
Frequently Asked Questions (FAQs)
What is the new surrender value introduced by IRDAI?
Policyholders can now surrender their policy after one year and receive up to 80% of the premiums paid, as opposed to the earlier two-year waiting period with lower returns.
How has the moratorium period changed?
The moratorium period has been reduced from eight years to five years, allowing policyholders to claim benefits earlier.
What is the benefit of electronic insurance accounts?
From April 2025, customers can manage all their insurance policies from a single electronic account, offering greater convenience and accessibility.
How has the waiting period for pre-existing diseases changed?
For health insurance, the maximum waiting period for pre-existing conditions has been reduced from four years to three years.
Will physical policy documents still be available after electronic accounts are introduced?
Yes, physical documents will still be available for customers who prefer them, although the default option will be electronic.
Disclaimer: This article is for informational purposes only and does not constitute professional financial or legal advice. Policy terms may vary by insurer, and customers should consult their insurance provider for specific details. The changes mentioned are based on IRDAI guidelines and are subject to periodic updates.