Irdai tightens norms to check insurance mis-selling by banks

Periodic declarations that no policy was forcefully sold will be given by banks

The Insurance Regulatory and Development Authority of India (Irdai) is further strengthening the norms against forced selling of insurance policies by banks. In its recent meeting, Irdai decided to seek an undertaking from the CEO and the chief financial officer (CFO) of the corporate agent (including banks) that there is no forced selling of an insurance product to customers at periodic intervals.

This would be on the lines of commission/remuneration received by these banks and other corporate agents that are disclosed, usually on a quarterly basis.

 

During the meeting of Irdai members, one member pointed out that often banks and financial institutions that act as corporate agents force the customer to buy insurance from a particular insurer. It was suggested the head of the banks (and other corporate agents) should take ensure no product is forcefully sold. This will be part of the regulations on registration of corporate agents.

The head of a private life insurer said there have been instances of banks trying to persuade customers to buy an insurance product. "It could be a life cover or a personal accident cover with low premiums that are pushed with a loan or account opening. Unless a customer wants the product, they should not be made to buy it," he said.

 

  In its latest draft norms, Irdai has done away with the capping of insurance business from one insurer by a bank. Compared to the previous draft that mandated banks to cap business from one insurer to 50 per cent, Irdai had removed this cap.

This would mean those insurers without a bank partner or promoter would still have to wait longer to get business from bancassurance. The regulator has said an insurer can have tie-ups with up to three insurers in any line of business-life, non-life or health.

 

The regulator has said at the time of seeking registration, a corporate agent has to file a board-approved policy on the manner of soliciting and servicing insurance products.

Irdai will release the final guidelines soon.