'Common database to check fraudulent insurance agents needed'

Insurance companies in the country are facing a piquant situation today. Even as they terminate the services of agents who indulge in fraudulent activities, other insurance companies are recruiting them. A typical case of a bad virus going around and infecting all and sundry.

The reason is the lack of a common database that informs insurers the reasons behind the termination of services of an agent.

This apart, though there is a system by which agents have to produce no-objection certificates before they switch insurance companies, the implementation of the system is still a major issue.

A growing number of insurance companies, therefore, believe that there is a need for life insurance companies to share databases regarding errant agents and the reasons for their termination so that activities of misconduct and fraud can be curbed.

T Chattopadhyay, zonal manager, south central zone, LIC says that greater liaising among insurance companies is required whereby if an agent's services are terminated by one insurance company because of fraud, other insurance companies also do not employ the same agent's services.

T K Banerjee, member, Insurance Regulatory Authority of India (Irda), points out that while the regulator has the power to withdraw the licences in case of fraudulent agents, the onus lies with the insurance company to prove the fraud.

"Many times, however, companies take the easier way out and just terminate the services of the agent instead of going through an investigation procedure," he says.

"Moreover, many insurance companies are still new to the industry. Therefore, they do not have the facilities for in-house investigation. They, therefore, do not take the effort of getting the licences cancelled by approaching the regulator after an investigation," Banerjee says.

"LIC is a huge corporation employing close to 11 lakh agents, it is difficult to keep track of the agents once they move out of the company," Chattopadhyay says.

"Moreover, although the no objection certificate (NOC) is required from the previous employer while recruiting an agent, its implementation is still an issue," he admits.

"Often, insurance companies also do not insist on NOCs as insurance agents do not reveal that they were employed elsewhere. This apart, there has been cases where agents have taken licences in the names of their wives or children. So an NOC again is not required in such cases," Chattopadhyay adds.

S Krishnamurthy, managing director of SBI Life, says, "There is a need for life insurance companies to share database in this regard to ensure good practices. The Life Insurance Council should discuss this issue for organised growth of insurance sector in the country."

"At present, there is no sharing of databases between life insurance companies and the only database that we share is with the regulator. However, with the Irda and the Actuarial Society of India (ASI) working on setting up a Mortality and Morbidity Investigation Bureau, there is likely to be some sharing of database information," he says.