Is Life Insurance Portability Allowed?
Unlike health insurance, where portability is formally permitted, life insurance policies currently do not offer portability between insurers. When customers want to switch life insurers, they usually need to surrender the existing policy and purchase a new one.
What is the Role of Account Aggregators?
Account Aggregators are RBI-regulated entities that allow individuals to securely and digitally share their financial data, such as bank statements, income details, and investment records, with financial information providers. The framework operates on user consent and ensures data privacy and security.
Although Account Aggregators do not facilitate policy portability per se, they can help in several related aspects like the ones mentioned below:
If you plan to switch to a new life insurer, Account Aggregators allow you to share verified financial information directly from your bank or other approved institutions with just a digital consent. This means the insurer receives authentic data instantly, without waiting for you to upload statements or proofs, which speeds up underwriting and reduces paperwork.
Future Potential for Seamless Transfers
As the Account Aggregator ecosystem grows and data sharing across financial institutions becomes more integrated, the framework could support more advanced features, like bank statement pulls for underwriting and making a loan offer, providing wealth management services, verifying the income of the applicant, annual KYC, estimating the income-based eligibility and conducting a risk assessment of the customer to offer a policy with adequate sum assured and premium basis the risk and income profile
While such developments would require regulatory support and system interoperability, Account Aggregators provide the foundation for such innovations.
Consolidated View of Policies and Investments
If life insurance policies are linked to your financial accounts, AAs can eventually help you maintain a consolidated view of your financial portfolio. This can be valuable when evaluating the performance of your current policy and deciding whether to continue, modify, or replace it.
Things to Keep in Mind
- No direct porting mechanism: As of now, life insurance portability like in health insurance is not permitted.
- Policy terms may differ: Even if you switch to a similar term plan with another insurer, premiums and policy features may not match your old plan.
- Re-underwriting applies: A new application means your risk profile will be assessed again based on your current age and health condition.
Can You Port Life Insurance Policies Using Account Aggregators?
Here is a table listing the current status of allowed practices for porting life insurance policies:
| Feature | Current Status |
|---|
Life Insurance Portability
| Not permitted
|
Use of AA to Share Data for New Policies
| Supported
|
Use of AA to Replace Manual Uploads
| Enabled through the RBI-regulated Account Aggregator framework
|
Final Thoughts
While Account Aggregators cannot directly enable the porting of life insurance policies, they play an important role in streamlining the process of buying a new policy or transitioning to a different insurer. By offering secure and digital access to your financial data, AAs reduce paperwork, improve underwriting speed, and make policy comparisons more informed.
