IRDAI Reg Section 5 : Definitions applicable to Part A
Act
Summary
Section 5 of the IRDAI Regulations, 2024, provides crucial definitions applicable to Part A, including terms like "mis-selling," which involves unethical sales practices, and "proposal form," a document for prospective policyholders to provide necessary information. It also defines "prospect," "prospectus," "solicitation," and "unfair trade practice," with references to the Consumer Protection Act, 2019. This section ensures clarity in insurance transactions and regulatory compliance.
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Explanation using Example
Example 1: Mis-selling through Misrepresentation
Introduction: John, a 45-year-old teacher, is approached by an insurance agent, Sarah, who works for XYZ Insurance Company. Sarah persuades John to purchase a life insurance policy by claiming it will double his investment in five years, which is not true.
Application: This scenario falls under Section 5, Definition (9)(b) of the IRDAI Regulations, 2024, which defines "Mis-selling" as making a false or misleading statement or misrepresenting the facts or benefits. Sarah's false claim about the investment doubling constitutes mis-selling.
Outcome: If John purchases the policy based on Sarah's misrepresentation, he may later find the policy does not meet his expectations. John can file a complaint with the insurance company or the Insurance Ombudsman. The company may face penalties for non-compliance with IRDAI regulations, including fines or sanctions.
Conclusion: Compliance with the IRDAI Regulations requires that all statements made during the sale of insurance policies be truthful and not misleading. Mis-selling can lead to legal action and damage to the insurer's reputation.
Example 2: Mis-selling by Not Ensuring Suitability
Introduction: Emily, a 30-year-old freelancer, is looking for health insurance. An agent from ABC Insurance Company sells her a policy designed for senior citizens, which includes benefits irrelevant to her needs, without discussing her specific requirements.
Application: This situation is covered under Section 5, Definition (9)(d) of the IRDAI Regulations, 2024, which defines "Mis-selling" as not taking reasonable care to ensure the suitability of th...
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