Benefits of Discount on Advance Renewal Premium Payment By Atri Chakraborty COO, IndiaFirst Life Insurance Company Ltd.

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Why does a customer wait to pay their insurance premium on the due date? Why not just pay premiums in advance? The key reason is the lack of benefits extended to policyholders for doing so. This automatically deters the customer from making advance payments. Probable changes in the customer’s financial situation later – for example, the non-availability of funds during the due date deprioritizes the premium payment and ultimately affects continuation of the life insurance policy. The regulator has also recognized the need of incentivizing customers when paying premiums in advance. Highlighting this gap, the Insurance Regulatory and Development Authority of India (IRDAI) recently issued draft guidelines allowing life insurance companies to offer discounts for renewal premium collected in advance.It meets the dual objective of allowing the regulator to curb policy lapses and customers to avail discounts on premiums.

These benefits will also have a corresponding effect on the insurance industry. Firstly, advance premium payments will avoid the premature lapse of policy covers. It will automatically help reduce the cost of collections which are incurred during follow ups, by insurers. Further, these benefits can be passed back to customers in the form of bonuses etc. The continual high rates of persistency will translate into increased profitability, reduced costs, optimal long-term income and overall growth and development for the organization. Whereas, the customer gets an incentive to pay it in advance giving them peace of mind and ensuring security.By rolling out this benefit to customers, we have come one step further in ensuring customer delight and organizational efficiency.

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