IRDA eases premium payment mode for policyholders

Moneycontrol Bureau

Insurance Regulatory and Development Authority (IRDA) on Wednesday directed all insurance companies to allow policyholders who are paying premium through the Electronic Clearing System (ECS) to discontinue the mode and shift to other form of payments.

"As the ECS mode enables collection of premiums without any manual intervention of policyholders, the Life Insurers shall allow the policyholders facility to withdraw from the ECS mode at least fifteen days prior to the due date of ECS submission," IRDA said in a circular issued on Wednesday.

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ECS mode, according to the insurance sector regulator, offers great convenience in certain ways to the policyholder. However, the degree of freedom enjoyed with other modes like cheque or cash payments is not available under the ECS process owing to various inherent reasons.

Generally, you can pay premium with a grace period of 30 days for which insurance companies will not impose any penalty. This flexibility is not there in case of ECS wherein the premium amount will be directly deducted from your bank account at a given date.

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The practical problem arises when your bank balance is below the premium amount. A policyholder is supposed maintain the required balance one day prior to the scheduled date of ECS payment.

"No Life Insurer shall levy any additional charges towards cancellation of the ECS mode/recover such additional charges from the benefits payable under the policy. Policyholders are to be made aware of all the procedures and timelines to be adhered to in connection with the ECS mandate, upfront at the time of option for this mode of payment," IRDA said.

Insurance companies are directed to intimate this communiqué to all existing policyholders who have opted for the ECS mode of premium payment. 

saikat.das@network18online.com