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Irda Announces Key Changes In Guidelines For Web Aggregators

Some key changes were announced by IRDA (Insurance Regulatory and Development Authority) through an exposure draft which was released on 24th July, 2013. Over the last few weeks, IRDA has been discussing changes in online distribution channel with insurance companies and web aggregators in order to provide an impetus to online distribution channel as well as prevent misselling through the channel.

The positives include allowing of certain activities (schedule IX of exposure draft) that can be outsourced from an insurance company to a web aggregator. These activities include premium collection (through online mode) and policy services (such as issuance of policy document, change of name and/or address, revival or cancellation of policy among others). The outsourcing of activities will help insurers and web aggregators in providing a better service to the end consumers. IRDA has also allowed web aggregators to function as telemarketers; albeit with certain conditions such as registration as a telemarketer with TRAI (Telecom Regulatory Authority of India), eligibility of telecallers, restriction of selling ULIPs through telemarketing channel etc. The authority has also removed the cap on payable commission (25% of first year commission payable). The payable commission will now be governed by limits prescribed in section 40-A of the insurance act.

At the same time, the new guidelines are likely to make the operations of a web aggregator more challenging with the cost of compliance and operations going up because of regulatory requirements to have principal officer, more frequent audits etc. IRDA has also brought down the display fees (upper limit) from Rs 1,00,000 to Rs 50,000 per product displayed. Also, no charges will be payable for leads by the insurers. Currently, seven companies have license to operate as a web aggregator including BuySmartPolicy.com. Licensed web aggregators such as BuySmartPolicy.com would need to re-define their operations in order to comply with the new guidelines. While these changes are likely to provide more flexibility to web aggregators in their operations, the aggregators would need to be more cautious in order to adhere to the new code of conduct.

The insurance industry has been witnessing a sluggish growth over the last couple of years and, hence, the new guidelines are likely to provide an impetus to the industry. Insurance density (ratio of total premium to population) is still low in India - insurance density for life insurance is $49, whereas global average is $378; insurance density for general insurance is $10, whereas global average is $283. The new guidelines are likely to have a positive impact on financial inclusion by increasing the reach of low cost distribution channels such as web aggregators to remote corners of the country. The web aggregator industry is more mature in developed countries. In UK, more than 25% of distribution takes place through web aggregators. In India, less than 1% of new business sale take place through web channel. The next few years would determine if the new guidelines would help in bridging the gap.

The draft guidelines which were released by IRDA were part of exposure draft and the next 15 days would be interesting to watch how the proposals in the exposure draft take shape in the final guidelines.

About BuySmartPolicy:

BuySmartPolicy.com is one of the pioneers in web insurance aggregation space. Today, there are so many products in the market that the common person is confused. There is also a sense of apprehension in the minds of common man because of the various clauses attached to insurance products. BuySmartPolicy.com was started to bring about simplicity and clarity in the minds of the common man which in turn would enable him/her to make judicious choices when it comes to purchasing insurance products.

Vision: BuySmartPolicy enables simplicity :: BuySmartPolicy helps people in making judicious choices while purchasing insurance and financial products by providing them a reliable and simplified platform, supported by a comprehensive database of insurance and financial products.

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Authored by: BuySmartPolicy
Published date: March 28 2018.

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