Irked with IRDA?

Insurance Inc is disillusioned with the performance, pace of decision-making, and policy flip-flops at Insurance Regulatory and Development ...

Insurance Inc is disillusioned with the performance, pace of decision-making, and policy flip-flops at Insurance Regulatory and Development Authority IRDA.

Rampant rebating, tariff violations and the sale of unsuitable life insurance policies to gullible investors is fast becoming the industry norm. If the umpire doesn8217;t blow the whistle, it becomes a free-for-all, complain insurance insiders. 8220;IRDA is neither regulating nor developing the insurance industry in India,8221; says the CEO at a leading insurance firm on condition of anonymity. 8220;They are not allowing the industry to form an association and want us to join a council promoted by IRDA itself,8221; he added.

The flip-flops in IRDA8217;s policy came to light when the issue of 5 per cent commission for general insurance brokers had to undergo scrutiny of multiple committees. IRDA first allowed, then disallowed, and then allowed commissions again. At present, a committee is reviewing the entire issue and IRDA Chairman C.S. Rao says they will review again after de-tariffing See Box.

There are other issues as well. Several companies have violated tariff rates of the Tariff Advisory Committee with impunity. They are able to get away with these violations because of the low penalty which they prefer to pay. IRDA admits that they have taken action against the errant companies See Box.

Several insurance companies are also overpaying commission by exceeding limits prescribed by IRDA. They are doing this by routing commission under various other heads. The industry also believes that IRDA has given licence to far too many brokers. At the same time, it has allowed companies to issue discounts to customers who purchase insurance directly. Given this scenario, a broker would be of service only if the tariffs were dismantled.

Even in the life insurance side of the business, IRDA has been unable to do justice to customers and agents. It8217;s a well-known fact that life insurance customers are taken for a ride by agents who prefer to sell only those products in which commissions are higher.

Then there8217;s the Rs 14,000-crore general insurance sector. Private and public insurers are issuing policies where over 95 per cent of the risks and premium are transferred to re-insurers oveseas. When the sector was opened up in the mid-1990s, the government had given an assurance that levels of premium retention, then at over 90 per cent, would be maintained. No measure is being taken to increase this retention.

8216;This system8217;s functioning quite well8217;

	nbsp;	IRDA chairman C.S. Rao on issues vexing the insurance industry On rebates being rampant despite IRDA8217;s ban: It8217;s not true that there is rampant discounting by insurance companies in the market. In case of non-tariff products, insurers have the flexibility to price their products depending upon the risk factors. For tariff lines of insurance regulated by the Tariff Advisory Committee TAC, corporates whose paid up capital is above Rs 3 crores can avail of special discount in lieu of broker8217;s remuneration. Or opt to place their insurance through a broker and avail of value-added service. On companies violating tariffs specified by TAC: There have been some cases where companies from both the public and private sectors have breached the provisions of the tariff. The Breach of Tariff Committee TAC has examined such breaches and has imposed penalty on the concerned insurers. On no redressal system for Mediclaim-related problems: Besides the grievance redressal mechanism of the insurance companies, they have access to the Insurance Ombudsman in their jurisdiction. This system has been functioning quite well. They can approach the consumer courts. On the absence of disclosures in life insurance, especially for equity-linked schemes: Life insurance customers are getting proper disclosures and this is being closely monitored by the Life Insurance Council which has come out with a benefits illustration circular to ensure proper disclosure. On the insurance industry not being allowed to form an association of its own: The Insurance Act itself provides for the Life Insurance Council and General Insurance Council. The Authority has activated the Councils which were redundant before opening up of the sector. Thus, the insurers have not been encouraged to form a separate association of their own to avoid duplicity and possibility of working at cross purposes..	nbsp;