Non-life players told to review composite plans

The Insurance Regulatory Development Authority (Irda) has asked non-life insurance companies to review their composite policies with a view to stop non-adherence to brokerage, commission and tariff polices.

"Certain companies are selling composite policies without adhering to the tariff stipulated by the tariff advisory committee. One such company was United India Insurance and we had asked it to reframe its product. There has been a number of other similar cases recently which has come to our notice. The review was to put things in order and make them abide by the rules, failing which we would take action," said C S Rao, chairman, Irda.

"We have also come across cases where the companies have been providing commissions and brokerages at levels not permitted by us. The review mechanism was also to keep a check on this method," he added.

The Irda, in a letter to insurers, have mentioned that the authority has come across instances where the non-life insurers are deviating from the tariff rates and other provisions in the guise of offering package products and in the process charge commissions and brokerage beyond the limits prescribed for tariff business.

"The products referred to above mainly cover building, contents, stocks against fire, allied perils, loss of profit, machinery breakdown, project, insurance, electronic equipment insurance in various industries in association with certain non-tariff covers pertaining to burglary, theft, personal accident, cash in transit, and mediclaim. The policies being marketed are normally named as asset all risk policy, property risk policy and business enterprise policy for covering industrial and manufacturing units," the letter said.

"The authority wishes to make it clear that the filing and use of such products under the 'file and use' system was strictly subject to the compliance of respective tariff rates and provisions and the circulars pertaining to commission and brokerage.

"However, in actual practice the operational offices of the insurers are marketing them entirely as non-tariff products violating tariff rates and prescribed rates of commission, brokerage to woo the agents, brokers and customers in violation of Irda's protection of policy holders interest, advertisement and disclosure regulations," the letter said.

"Insurers who are issuing policies which are in contravention of the tariff are advised to withdraw such products from the market and confirm to Irda immediately. The revised product may be filed with the authority after ensuring that the rates, terms and conditions of tariff are not violated and the commission, brokerage payable is regulated as per the limits prescribed on tariff and non-tariff business respectively," Rao said.