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New norms for selling insurance online

LiveMint logoLiveMint 15-03-2017 Deepti Bhaskaran

In order to create a digital platform for the insurance industry, the Insurance Regulatory and Development Authority of India (Irdai) issued guidelines for insurance e-commerce on 9 March. “The idea of these guidelines is to standardize e-commerce rules across different entities selling insurance online. Anybody who now wants to sell insurance on a digital platform will need to setup an insurance self-network platform (ISNP) and follow the rules for it,” said Yashish Dahiya, co-founder, Policybazaar.com.

This means that any entity that wants to offer policies online will do so through an insurance self-network platform (ISNP)—this can be your regular website, a mobile app or both. “Any insurers or intermediaries, like web aggregators or insurance brokers—who have a website—will now have to get an ISNP license. In terms of the look and feel of the website, nothing changes. However, you will see some hygiene factors like more clarity on service turnaround time, legal details and grievance redressal mechanisms,” Dahiya added.

We pick some salient features of the e-commerce guidelines and tell you how they may change your insurance buying experience. 

Contrary to popular belief that insurance e-commerce guidelines will pave the way for e-retailers like Flipkart and Amazon to sell insurance, only a licensed entity can sell insurance online. So, only insurers, brokers, agents, intermediaries or other entities recognised by Irdai can sell policies on the online platform. 

Insurance intermediaries include distributors such as corporate agents, web aggregators and insurance marketing firms. As agents are tied to one insurer, they can use the digital platform of the insurer to sell policies online. As per the guidelines, insurers can enrol only insurance intermediaries on their ISNP and no other insurer. Whereas, an insurance intermediary can only enrol insurers allowed as per regulations. So, an insurance marketing firm, for instance, can enrol only two insurers from the same line of business; whereas web-aggregators can enrol multiple insurers. 

Further, as per the circular, if any unregistered market participant is enrolled by the applicant’s ISNP, then it will be viewed as a very serious violation. Also, applicants are not allowed to accept redirected internet traffic references from other market participants. 

“At a time when other financial regulators are discussing ways to use the e-commerce platforms to sell financial products, Irdai has made it clear that only licensed entities can sell insurance, even on the digital platform. This is a big change from the original idea as the current guidelines only ensure ease of selling online but don’t really increase the reach,” said an insurance industry expert, who did not want to be quoted. 

In terms of pricing, the rules state that insurers can offer discounted pricing on a product when it is sold through its ISNP. However, the differential price for products offered on the digital platform will remain the same, whether it’s offered through the insurer or the distributor. “So, if it is a policy that doesn’t have commissions built-in and is charging a certain amount of premium, then even when an insurance intermediary sells the policy in its ISNP, the premium will remain the same. Similarly even if an agent sells a policy using a tablet (instead of a physical form), the premiums will remain the same,” added S.V. Ramanan, chief executive officer, CAMS Insurance Repository Services Ltd. The rules further state that no cashback, promotional incentives or payments will be allowed by payment gateway companies. As per the rules, apart from allowing electronic payments by way of credit cards, debit cards, net banking and e-wallets, the rules also allow for premium payment through cheque and demand draft. Even cash is acceptable if the insurer can give an immediate acknowledgement on either the policyholder’s email address or her mobile phone number, of having received the premium.

The guidelines make an e-insurance account mandatory. An e-insurance account lets you hold your policy in a digital format. As per the notification, creation of an e-insurance account will have to be done within 15 days of selling the insurance policy on the applicant’s ISNP. 

Also, it is necessary for a customer to have either an email or a registered mobile phone number to buy through the digital platform. However, according to Dahiya, it is still a grey area. 

“It is still not very clear if an e-insurance account is mandatory as the rules also state that the insurer may also credit the policy document to the e-insurance account of the policyholder. General insurance policies such as two-wheeler, health, or travel insurance have quick issuance online. By mandating an e-insurance account, the whole process becomes tedious,” he said. 

However, the Know Your Customer (KYC) process can be undertaken using facilities such as eKYC offered by the Unique Identification Authority of India using e-Aadhaar or the ePAN facility offered by the National Securities Depository Ltd. 

“There is no need for physical signatures for eKYC, however when KYC documents are collected physically, they need to be self-attested and if the agent is selling using a tablet, then a one-page declaration form will have to be signed by the customer,” added Ramanan.

Insurers or intermediaries who already have a digital platform can continue to sell. However, they have to comply with the requirements of the guidelines within a period of 3 months. The entire text of the circular can be read at: bit.ly/2mVuOoH.

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