Insurance sector almost compliant with norms: Players

Simplification of policy terminology will require some more work; Irda turns focus to customer services

The finance ministry has asked regulators to voluntarily implement the non-legislative recommendations of the Financial Sector Legislative Reforms Commission (FSLRC). However, the insurance sector has a reason to cheer since they believe the sector is almost compliant with the proposals of the commission. Only the terminology in policies needs to be simplified to ensure there are no unfair terms in financial contracts, say players.

The guidance handbook of FSLRC deals with issues relating to consumer protection for retail customers, timeline requirements for framing regulations, notices to regulated entities, transparency in board meetings, reporting, approvals, investigation, adjudication, imposition of penalty and capacity-building.

With respect to consumer protection, the Insurance Regulatory and Development Authority (Irda) has set up a committee to advise the regulator on customer services. This committee has members from life insurance firms, non-life companies, and Life and General Insurance Council, among others.

Further, the regulator is looking into whether customer-centric regulations can be re-looked at. Under this initiative, all insurers have been asked to file their citizen charters and Irda is looking into the possibility of having product-specific citizen charters. With respect to regulations, Irda is looking into whether the the Policyholder Protection Act needs a revamp. Insurers have also been asked to file a statement of customer services-related issues and data given to their respective boards.

An Irda official said with respect to insurance, most proposals, from transparency to customer grievance management, have been implemented and only some polishing is required with respect to the existing regulations.

With respect to the FSLRC handbook's recommendation on the regulator identifying a separate category of retail consumers comprising individuals and small and medium enterprises that obtain financial products or services below a specified value and providing them additional protections like grievance redressal, Irda has put in place mechanisms to deal with it.

Executives, however, said the insurance contracts were very technical in nature and difficult for the customer to comprehend in several cases. “Both the sector and the regulator are working closely to make changes in this sphere and make these contracts simpler by making use of common English words in the policy. This will ensure the customer will not get a raw deal and no unfair terms are presented,” said the chief actuary of a mid-size life insurance company.

By Irda regulations, these customers/policyholders are entitled to grievance redressal if they have any complaint about the insurer or the product. If they are not satisfied with the company’s response, they can also contact the Insurance ombudsman of the region and can later approach the court. The insurance regulator has also set up an Integrated Grievance Management System  (IGMS) to deal with customer dissatisfaction.  Insurance executives also agree. The chief executive of a large private life insurance company said Irda has also put in place all regulations to ensure protection of customers. “While there is always scope for improvement, new measures like common definitions for products will ease the process of insurance and make it more customer-friendly,” said the official.

One area which insurers said could see some concrete steps is customer privacy. While the code of conduct of all companies operating in the insurance space clearly states that no customer information is to be provided to any person(s), there is as such no regulation in this area.

In the area of imposing penalty, too, Irda has been taking regular actions on erring parties, be it insurers, third-party service providers or other intermediaries. With respect to public disclosures, too, all insurers have been directed to provide all financial information on their website every quarter. The regulator, too, posts all information related to new regulations, notices and board meeting minutes on its website periodically.

One area which insurers said could see some concrete steps in the field of customer privacy. While the code of conduct of all companies operating in the insurance space clearly states that no customer information is to be provided to any person(s), there is as such no regulation on this particular area. Detailed regulations on customer privacy is an area which could see some changes in this financial year, said a senior life insurance executive.