Regulation for insurance intermediaries

An Insurance Intermediary means individual agents, corporate agents including banks and brokers they intermediate between the customer and the insurance company. Insurance Intermediary also includes Surveyors and Third Party Administrators but these intermediaries are not involved in procurement of business. Surveyors assess losses on behalf of the insurance companies. Third Party Administrators provide services related to health insurance for insurance companies.

The Department of Financial Services has, by way of a notification dated September 2, 2019, issued certain amendments to the Indian Insurance Companies (Foreign Investment) Rules, 2015, permitting 100% foreign investment under the automatic route in insurance intermediaries (such as third party administrators, web aggregators, insurance brokers, etc.), subject to verification by the Insurance Regulatory and Development Authority of India (‘IRDAI’) and compliance with pricing guidelines prescribed by RBI. On October 30, 2019, the IRDAI amended various regulations applicable to insurance intermediaries by notifying the IRDAI (Insurance Intermediaries) (Amendment) Regulations, 2019 (‘Intermediaries Amendment Regulations’) to inter-alia introduce the requirement of an undertaking to be furnished by intermediaries incorporated as a company under the Companies Act and where a majority of the shareholding is held by foreign shareholders, to the effect that:

1. The chairman of the board or the managing director/ chief executive officer/ principal officer of the insurance intermediary is a resident Indian citizen;
2. The insurance intermediary must take prior permission of the IRDAI for repatriating dividend;
3. The insurance intermediary will not make payments (other than dividend) to related parties, taken in the aggregate, beyond 10% of the total expenses in a given financial year; and
4. A majority of directors and key management persons will be resident Indian citizens.

Insurance is a complex product representing a promise to compensate the insured or third party according to specified terms and conditions in the event of the occurrence of a covered contingency. In most insurance transactions there is usually an intermediary an insurance agent (individual or corporate) or an insurance broker.

• Insurance intermediaries serve as a bridge between consumers (seeking to buy insurance policies) and insurance companies (seeking to sell those policies).
• Insurance brokers are licensed by the IRDA and governed by the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002. Individual insurance agents and corporate agents are also licensed by the IRDA and governed by the Insurance Regulatory and Development Authority (licensing of Individual Insurance Agents) Regulations, 2000 and the Insurance Regulatory and Development Authority (Licensing of Corporate Agents) Regulations, 2002, respectively. These Regulations lay down the Code of Conduct for the respective intermediaries.

No intermediary can offer any discount to you to induce you to take the policy. If any such inducement is resorted to, it is in violation of Section 41 of the Insurance Act, 1938 and all parties involved would be subject to prosecution as provided by the Law.

In view of the above, IRDAI issued an additional circular on November 19, 2019 whereby the guidelines dated November 20, 2015 on ‘Indian owned and controlled’ for insurance intermediaries have been withdrawn. Notifications under exchange control regulations to operationalize 100% foreign equity investment in insurance intermediaries are yet to be notified.

The Consumer Affairs Department of the Insurance Regulatory and Development Authority (IRDA) has introduced the Integrated Grievance Management System (IGMS) which is an online system for registration and tracking of grievances. You must register your grievance first with the insurance company and in case you are not satisfied with its disposal by the company, you may escalate it to IRDA through IGMS by accessing www.igms.irda.gov.in. In case you are not able to access the insurer’s grievance system directly, IGMS also provides you a gateway to register your grievance with the insurer.

Apart from registering your grievance through IGMS (i.e., web), you have several channels for grievance registration-through e-mail (complaints@irda.gov.in), through letter (address your letter to Consumer Affairs Department, Insurance Regulatory and Development Authority, 3rd Floor, Parishram Bhavan, Basheerbagh, Hyderabad:4) or simply call IRDA Call Centre at Toll Free 155255 through which IRDA shall, free of cost, register you complaints against insurance companies as well as help track its status. The Call Centre assists by filling up the complaints form on the basis of the call. Wherever required, it will facilitate in filing of complaints directly with the insurance companies as the first port of call by giving information relating to the address, telephone number, website details, contact number, e-mail id etc of the insurance company. IRDA Call Centre offers a true alternative channel for prospects and policyholders, with comprehensive tele-functionalities, serving as a 12 hours x 6 days service platform from 8 AM to 8 PM, Monday to Saturday in Hindi, English and various Indian languages.

When a complaint is registered with IRDA, it facilitates resolution by taking it up with the insurance company. The company is given 15 days’ time to resolve the complaint. If required, IRDA carries out investigations and enquiries. Further, wherever applicable, IRDA advises the complainant to approach the Insurance Ombudsman in terms of the Redressal of Public Grievances Rules, 1998.