A physical signature is a very important component of the entire life insurance buying process. This is significant because life insurance is a long-term contract and what is signed once will be applicable for the entire duration of the policy.
However, COVID-19 has changed the entire situation and now the insurance regulator IRDAI has allowed insurance companies to do away with the physical signature while issuing insurance policies. While this might seem convenient, there are a lot of factors involved and these need to be looked at carefully.
What is the normal procedure when buying life insurance?
Normally, the policyholder is expected to sign on the physical form and this is known as a physical signature or a wet signature. It is proof of the acceptance of the terms and conditions of the policy. This means that the customer has to look at the proposal and then confirm its acceptance and the physical sign is proof of this.
What is the change that has been made ?
Now, insurance companies have been allowed to obtain the consent of customers without a physical signature but they need to follow a certain procedure.
The complete proposal form has to be sent to the customer either through email or on a mobile phone. The important thing is that either of the modes is acceptable. The email should contain the full details of the proposal while on phones, the customer can be sent a message with a link that has the proposal details.
How will a customer give their consent now?
The customer has to confirm their acceptance either by clicking on the link provided or by entering the OTP that is provided for in the entire process. Either of the ways will be considered as acceptance of the terms and conditions of the policy.
Is there some protection for the customer with respect to payment?
There will have to be a specific procedure followed in terms of the payment for the purpose of the policy. The insurance company cannot accept any payment till the time that the proposal has been accepted by the customer. Thus, there is no need to pay money upfront but instead there should be a confirmation first and then the payment should be made.
What is the safety feature for the customer in this entire process?
The agent or the intermediary will also have to certify that the email or the phone number of the customer is properly recorded. The insurance company will have to validate and authenticate the email and phone number by following necessary procedures. There also has to be proper material given for the sales process and all pre-issuance verification calls need to be made by the insurance company.
Will this be a permanent change in procedure for life insurance policies after things return to normal?
The customer has to understand that this facility of validation through online means is just a temporary facility and that this has not been changed forever. This temporary facility will be available only till the end of December 2020.
It has been clearly stated that this is an experiment and that there is a chance that the regulator may have to shut down the facility at any time for all the insurance companies or even some specific insurance company.
Is this valid for all kinds of life insurance policies?
This facility of not using the physical signature is possible only for pure risk products. This means term insurance policies where there is no savings element. There is only a life cover in such products and there is no element of savings present. Traditional policies are all savings element policies and these are not covered under these guidelines. So, in a way, there is a limited scope for the applicability of this procedure.
(The writer is founder at Moneyeduschool.)
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