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Mr. Krishnan has a child insurance policy and pays the premium on a quarterly basis. He is very diligent with paying the premiums as he has taken the policy to facilitate his daughter’s higher education.However, of late, he has been travelling frequently on work and therefore has been keeping extremely busy.
He has already defaulted twice on the premium payment for the policy despite the reminders sent by the insurer. Consequently, his policy is on the verge of being discontinued by the insurance company. This problem is commonplace given the busy schedules that many of us have today.Krishnan’s problem is just one example. It is easy to default on our premium payments because of things as trivial as running out of cheque leaves or simply forgetting the due date. An effective answer to Krishnan’s problem, and for all of us , is ECS - or electronic clearing service.
Involving automatic fund transfer from one bank account to another. It is designed to assist in making periodic payments of any kind, ranging from insurance premiums to utility bills. When the ECS facility is activated for insurance premium payment, the premium is deducted by the policyholder’s bank at a pre-decided date and remitted directly to the insurer.
WHY PAY PREMIUMS THROUGH ECS
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Since regular payment of premiums is critical for any insurance policy, subscribing to ECS will ensure that there are no defaults, therefore eliminating any possibility of lapsation. It is a hassle-free method that does away with all concerns on the customer’s part to keep a track of premium payments. It is also convenient as it involves no physical transaction nor does it require the customer to go to any bank or office. While many policyholders may be skeptical about using an automated system for monetary transactions, you can rest assured of the safety of your money while using this facility as ECS is tightly regulated by the RBI. The policyholder’s account and policy details too remain confidential, as mandated by the regulator. Also, subscribing to ECS for insurance premium payment is pocket friendly as there is no additional charge levied either by the bank or the insurer for availing this facility. |
HOW DOES ECS WORK
To avail the facility of paying premiums through ECS, the policyholder has to fill an ECS mandate form which can be procured online or from the insurance firm. Once the customer has filled the form and submitted the same with a cancelled cheque to the insurance company, the rest of the formalities are taken care of by the insurance company with the bank. By doing so, the policyholder authorises the bank to deduct the premium on the due date. Once the ECS facility is activated and the premium amount starts getting deducted from the policy holder’s account, the customer gets receipt notifications from the insurance company. ECS facility is currently offered in select cities which vary for each insurer. Typically, most of the large- and mini-metros and tier-II cities are covered . ECS payments can only be made on a policy on which there is no overdrawn premium.
Also, one must keep in mind that sufficient balance is to be maintained in the bank account. One can set the maximum amount that can be debited from the account and also set the validity period for the mandate. In case the customer wishes to discontinue the policy or simply switch back to regular means of payment (other than ECS) he can do so by sending a written application to the insurer as well as the bank. When you deploy the ECS payment mechanism, this also leads to improvement in efficacy levels of insurance firms by reducing administrative work and cost, and enables them to provide superior service. Planning and automating premium payment through this route is indeed an ideal solution for today’s busy consumers.
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