Impact of IRDAI regulations on consumer empowerment

Mahendra Tripathi

Keeping with the Government’s continuous efforts to ensure a compliant regulatory framework and protect the consumers’ interests, the slew of measures introduced by Insurance Regulatory and Development Authority of India (IRDAI) in 2017 have been a step in the right direction.  These regulatory initiatives are creating new avenues for the sector and will eventually expand the country’s insurance market.

Thanks to the new regulatory framework, on one hand the insurance industry has a clearly defined charter and on the other, the renewed consumer confidence is creating increased awareness and new opportunities for growth. The primary aim of the IRDAI regulations - to protect consumer interests - is visibly being achieved even in the short period that the regulations have been in effect this year.

As a responsible general insurance company enjoying leadership position in the sector, it is our constant endeavor to ensure that our customers – and consumers at large – benefit from the regulatory changes. Some of the early results of the recent regulations are:

New rules to curb aggressive selling online: Online channels have been gaining ground due to their ease of navigation and buying. However, consumers are often pitched products through aggressive marketing, which effectively negates the power of choice they should ideally have.  The new IRDAI (Insurance Web aggregators) Regulations, 2017 are set to change this. They mandate that web aggregators or insurance brokers with an online presence should not promote or push a specific product of a company either through their website or through distance marketing. Further, the product should be sold on the basis of a need analysis of the consumer.

New outsourcing guidelines for insurers: A new set of guidelines on outsourcing activities by insurers defines the areas of activity that can be done in-house and those that may be outsourced to third-party providers.  Essentially, the core functions of an insurer, such as actuarial activities, risk management and decisions on underwriting and claims will need to be executed in-house. Investments and related functions, too, cannot be outsourced. This move would help insurers follow prudent and rigorous practices while ensuring adequate due diligence and oversight in areas that are outsourced. This is in the best interests of consumers as tighter controls with insurers would lead to more robust risk assessment practices and servicing quality. 

No exclusive tie-ups with automobile dealers: With general insurance companies now able to sell motor cover policies through auto dealership networks at differential prices, this step formally recognises the role that automobile dealerships are playing for long in the motor vehicle insurance business. This means that consumers aren’t bound to the insurer(s) with whom a dealer has an exclusive tie-up. Now, they can choose from a wider range of brands and policies by comparing prices and features. As a result, we are seeing greater competition among insurers to offer the best deals and differential pricing to customers according to their risk profile.

No denial of claim on grounds of delayed filing: Insurance claims now cannot be denied to a policyholder purely on the grounds of delay in filing the claim. The Supreme Court has ruled that denial on such technical grounds isn’t fair and reasonable, and would lower people’s confidence in the insurance industry. This serves as a big relief to those who are unable to file their insurance claims promptly after their vehicles are stolen or damaged in an accident for practical reasons.

Aadhaar linkage to insurance policy: The Government has mandated linking of Aadhaar numbers with insurance policy. The implication being that insurers may hold claims payments until policyholders submit their Aadhaar and PAN number. This breakthrough solution is expected to benefit both insurers as well as customers. Aadhaar will act as a KYC document, reducing paperwork which in turn will enable faster claim settlement.

While protecting the interests of the consumers, the regulators have also addressed the needs of insurance agents, who play a crucial part in the business operations. IRDAI has recently raised the maximum limit for agent commissions on comprehensive two-wheeler insurance policies from 15 percent to 17.5 percent, even as other commissions are under review.

Thanks to an alert regulatory body that is continuously understanding the needs of the consumers and introducing measures to safeguard them, the consumers are today having better choice, better service and better protection.

The writer is Head-Compliance, Legal & Company Secretary, SBI General Insurance