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The Insurance Regulatory and Development Authority (Irda) has advised insurance companies to use distinct trade logos of their own. In an exposure draft on usage of Trade Logo by Insurance Companies, Irda highlighted the reputational risks associated with insurers’ using the trade logo of their business partners or promoters.
“Keeping in view the risks associated with trade logo and the long-term interests of policyholders, all insurers shall consider developing a distinct trade logo of their own so as to minimise not only possible confusion in the minds of insuring public, but also the costs, be it the consideration amount or the compensation, associated with the trade logo of the promoting partners,” said Irda chairman T S Vijayan in the draft.
In the exposure draft, Irda noted that where an insurer adopts the trade logo of any of its partners, there shall be a prominent declaration that the insurer is a separate entity, giving the names of all joint venture partners. The insurer should also state clearly that mere adoption of a promoter’s logo does not convey any inheritance of financial strength and the quality of promoter in products and services of the insurer.
According to Irda, if an insurer adopts the trade logo of any of its partners, there should be a written agreement setting forth the underlying terms and conditions. Further, the parties to the agreement shall specify the consideration amount, if any, leaving no scope for any arbitrary payments.
Where the consideration amount is not mentioned as an absolute amount, but referred as a percentage of premium income, specified ceiling as an absolute amount shall be mentioned, leaving no scope for any disproportionate windfall gains to the other party.
Irda said it should be clearly mentioned in the terms and conditions whether any consideration amount is involved. The regulator has also proposed that the agreement may be for a specific period of time with a provision to renew in the agreed periodicity.
The business interests of the insurers should be protected if the logo of promoting or foreign partners is used, Irda said. This is because logos are reared and sustained over a span of business periods carry with them significant reputational risks and they are considered intangible assets.
Irda said some companies are using only promoting partner’s trade logo, even if the other promoters are having a significant share in the company. Further, it said some companies use the logos of their partners without proper agreements. Some companies have agreements for using promoting partners’ logos, but there is specific timelines for usage of trade logo, Irda noted.
“Absence of specific consideration amount may result in fleecing Insurers’ expenses in the case of any unforeseen contingencies, if determination of compensation is based on future discretion with no pre-defined parameters. In the event of exit of the promoting partner, the costs of building the unique logo may be prohibitive. Otherwise the exited partner may charge the Insurer exorbitantly," Vijayan said in the draft.
All insurance companies that use their partners’ trade logo have been asked to comply with these guidelines.
