Kathmandu: The insured of life insurance companies will get only one time interest rebate against policy revival during the whole policy term. The directives issued by Insurance Board on life insurance policy ‘Life Insurance Policy Directives 2021(2078)’ has such provision.
Earlier, the insured used to get benefits of policy revival more than one time within the policy term. Clause 2 of Article 11 of the directives states that interest can be waived only on revival of insurance policy which has been in lapsed state since last two years. Now the insurers don’t have to get pre approval from Insurance Board for the interest waiver scheme though the information for the same must be provided to the IB. Earlier, there was a provision to launch interest waiver scheme only after receiving prior consent from the Insurance Board.
A life insurance policy is considered to be lapsed if the renewal premium remain unpaid for more than six months from the due date. In the case of lapsed policy, the insured can renew it by paying all the due premiums and interest (penalty) any time within the policy term.
Due to the high number of insurance policies, all the insurers have been launching interest discount scheme from time to time with the objective of motivating the insured for policy revival. A discount of 25 to 100 percent is provided depending on the lapsed period.
Benefits of Policy Revival:
The most important benefit of revival is the entire availability of facility under insurance policy. After the revival of the insurance policy, all the facilities and conditions under it become active. Therefore, in case of any event under any terms and condition mentioned in the policy, the insured or the nominee will get the entire amount and facility as per the condition.
The ratio of policy lapsation is high in Nepal as agents and insurers tend to forcefully sell policies, completely ignoring the need of the insured, financial condition, future savings potential. On the other hand, the tendency to force the insured to buy the insurance policy by giving false or insufficient information about the features of the life insurance plan is also making it difficult to renew the insurance policy.
No matter how hard the agent tries to sell the insurance policy, the insured will not be able to pay the premium even due to insufficient information as agent neglects to make follow up for the payment of renewal premium. And, In this regard, the Insurance Board is likely to change the arrangement of the current commission amount received by the agent. At present, the 19-year term life insurance plan has a provision of 25 percent commission for the first year, 15 percent for the second year and 5 percent for the third to tenth year. Similarly, single premium insurance plan has a provision of 6 to 10 percent commission. The commission amount is determined on the premium amount paid by the insured.