Calcutta, Aug. 9: The Insurance Regulatory and Development Authority of India (IRDA) has directed life insurance firms to allow policyholders to opt out of the ECS mode of premium payment. Insurers feel the move will give more freedom to policyholders and prevent policy lapses.
“As the ECS (electronic clearance system) enables collection of premium without any manual intervention of policyholders, life insurers shall allow the policyholders the facility to withdraw from the ECS mode at least fifteen days prior to the due date of ECS submission,” the IRDA said in its circular.
The IRDA observed that despite the convenience of the ECS mode, the freedom in payments through cheques or demand drafts was not available under ECS “owing to various inherent reasons”. The move will benefit policyholders in situations where they do not have sufficient balance in their account at the time of the deduction of premium.
“Under the ECS mandate, an amount of money paid as premium is deducted at a particular date. Now, if there is no money in the account, the policy will lapse. So, if the personal cash flow of a policyholder is strained, this could be convenient for him,” Atanu Sen, managing director and CEO of SBI Life, told The Telegraph.
Rajit Singh, executive director and chief operating officer of Max Life Insurance, said unlike the ECS mode, alternative payment modes offered a grace period of 20-30 days without penalty.
The IRDA also asked the life insurers not to levy additional charges towards the cancellation of the ECS mode or recover any such charge from the benefits payable under a policy.
The IRDA has relaxed investment norms in housing finance and infrastructure finance companies, which can now get higher funding from insurance companies.
“Investments in debt instruments issued by housing finance companies shall not be included under the exposure to financial and insurance activities,” the IRDA said.
Further, the single investee debt exposure limit in housing finance companies has been raised to 20 per cent of the company’s equity plus free reserves from the existing 10 per cent limit.