IRDAI planning to step up scrutiny for products aimed at 55+

Insurance misselling has been a tormentor for policyholders for long, and to minimise the menace the Insurance Regulatory and Development Authority of India (IRDAI) has decided to intensify scrutiny of insurance products, especially those targeted at citizens who are past 55, The Economic Times has reported. Health policies and savings plans are among the products the IRDAI plans to focus on.

The insurance regulator has already begun discussion with banks and related stakeholders. The objective is to increase levels of transparency in the selling of policies. It is also supposed to include video recording of the verification before the policy is accepted by the customer.

An official told the newspaper on condition of anonymity, “There is a view that scrutiny for complex products needs to be tightened further. This should be more so in cases where the benefits fluctuate on account of market-linked products and health or savings products offered to the age group above 55.” There is also a need to maintain greater transparency while dealing with prospective customers who are illiterate.

A framework is also being considered where the entire selling process including solicitation, customer outcomes and grievance redressal processes are audited and documented.

An official of a bank also told the newspaper on condition of anonymity, “IRDAI is looking to curb misselling through the bancassurance channel, and it has been suggested that bancassurance partners will not assign any targets and give direct or indirect incentives to their staff for selling policies.” Bancassurance refers to an agreement between banks and insurance companies whereby the former act as selling channels of insurance products.

According to the IRDAI annual report there are a total of 241 banks and 323 NBFC and other corporate agencies selling insurance products in the country. The numbers can be disaggregated as follows – 21 for life insurance products (9 banks and 12 NBFCs), 35 for general insurance (8 banks and 27 NBFCs) and 508 composite insurance products (224 banks and 284 NBFCs).

In December of last year financial services secretary Vivek Joshi met chiefs of PSU banks to discuss matters related to bancassurance. A prominent part of the deliberations centered around the menace of misselling. In FY23, banks accounted for 5.93% in non-life premiums and 17.44% in new business premiums for life insurance.

The climate is becoming less and less conducive to misselling. Recently, the Income Tax department prepared a report on how intermediaries were being used in some cases by insurance companies to lure agents with additional commissions beyond the limits allowed under extant regulations.