Role of the IRCSL in ensuring all Sri Lankans are safeguarded by Insurance


The Insurance Regulatory Commission of Sri Lanka, one of the bodies leading the effort to increase insurance penetration in the country, is also a key player in the organization of the activations, programs and other events that make up the month of September, beginning with the celebration of National Insurance Day on the 1st of the month. A number of primary factors come into play in regards to the increase of insurance penetration, the role of the insurance advisor, and the strategies, plans and efforts of the Insurance Regulatory Commission to ensure that every citizen of Sri Lanka enjoys the security provided by insurance.

Insurance advisors are predominantly individuals functioning as agents or representatives of insurance companies and insurance brokering companies to procure insurance business on their behalf for a fee known as a commission. Hence, insurance advisors are the first to get in touch with the public or potential policyholders on behalf of the company it represents, and advise the public on the importance of insurance and the benefits that a person can gain from insuring life, health and property. It is therefore the responsibility of the advisor to determine the insurance needs and the financial strength/capacity of a client, prior to promoting an insurance product, as identifying the right product to be sold with the right coverage depends on the needs of the customer, and their financial capacity to purchase a product and continue with the payment of premium. Once a product is identified, full details of the product should be given to the client. This includes, what the product covers, its benefits and exclusions, and terms and conditions. If the advisor is of the view that the company he/she represents does not have a product suitable to the client, then the advisor should refrain from promoting its products and advise the client to look out for a suitable product at any other insurance company. Therefore, the advisor should act and be seen, as a person with knowledge on insurance products as well as integrity and professional standards. The advisor should also be in constant touch with their clients and maintain a healthy advisor-client business relationship. If the role of the insurance advisor is played in a manner expected of him/her, clients will begin to trust the advisor and the insurance company, and no extra effort will be needed by an insurance advisor to convince policyholders to keep their policies active.

Policyholders tend to lapse their policies due to many reasons. By letting the policy lapse, the policyholder discontinues the contract they commenced with the insurer, thereby ceasing to enjoy the full benefit of the insurance cover/product they purchased, and also resulting in forfeiture of the full or part of the premiums paid. Forfeiture of premiums paid takes place because an insurance company assumes liability from the first day the cover begins. So if the premium is not paid at least until the cover acquires a surrender value in terms of the policy, in case of a life/long term insurance product, the entire premium paid would get forfeited. In a general insurance product, if the full premium is not paid within the due date of payment specified in the policy, the cover would automatically get canceled.

"I consider three specific reasons for the discontinuation of an insurance contract. The first being, the force selling of a product by an insurance advisor. This is a situation where a product is sold to a person without the will of the person to purchase it. If the purchase is with intention, then a person will want to keep it, otherwise they will let it go. The customer should want insurance, the customer should know the features of the insurance product and its benefits. The features should match with customer expectations. If that link is not established at the point of sale, the need for the product is lost and the policyholder will give up the policy and stop paying premium without incurring further losses. The second reason, is where the product is purchased with the full intention of having it and as time goes by, circumstances arise where a person cannot afford to pay premium and hence, discontinues the policy. The third reason for discontinuation would be the poor service levels of an insurer. In this scenario the person has the full intention and the financial capacity to maintain an insurance policy. However, if the policyholder is not satisfied with the service levels of the company, he/she will want to discontinue the policy", stated the Director General of the IRCSL, Ms. Damayanthi Fernando.

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