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Insurance Regulator ( Irda ) is body which works to improve functioning of insurance industry. Regulator always in search for the better to ways of regulating the business and protecting the interest of the policyholders.

Therefore Irda updates its regulatory norms from time to time for the better functioning of the industry. Keeping these things in mind Irda soon may come with new norms for insurance agents.

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Thousands of life insurance agents may face the risk of loosing their license, if their 50% sold policies lapses within three years as per the new regulatory norm. This will also cut a source of non-operating income.

Life insurance agents has to make sure that 50% of the policies they sold till march 2014 do not lapse. Irda also giving emphasis on to maintain persistency of 75% of remaining policies, notification to chiefs of insurance companies from IRDA.

Low persistency levels of life insurance companies has become cause of concern for the Insurance Regulatory. Number surrenders and early lapses of policies have increased. Therefore it is very important to maintain persistency where agent role is vital. 

Agent who should provide suitable products by bringing transparency in correct and complete details of product policyholders and by considering the needs of prospective policyholders.

Insurance agents to earn high commissions sell many policies to an individual dangling the carrot of tax benefits, but the customers struggle to maintain their policies year after year. This has led to an industry average lapse of around 30%, because of which customers lose and companies gain. The industry average lapse ratio is as high as 30% and the norm will make sure forced selling is reduced.

Insurance policy lapses, if a policyholder fails to pay premium for a specified period. Persistency refers to the percentage of policies that remain in force on a particular date and it is calculated in percentage.

Insurers, currently, stipulate targets in terms of number of policies sold and the premium income for their agents and if they cannot achieve these their agency is taken away by the insurer. However, most insurers do not stipulate any persistency ratios for their agents.

Hopefully new norms of Irda over insurance agents will bring transparency and will help to reduce surrenders, policy lapses and improve the persistency levels of insurance companies.

Know more about Life Insurance Policies in India.