More, tighter norms proposed for web aggregators in insurance

Insurance regulator says these aggregators would be treated as insurance intermediaries

Web aggregators might have to face tighter norms for operating in the insurance sector. In proposed rules, the Insurance Regulatory and Development Authority of India (Irdai) has suggested the capital requirement (paid-up capital and net worth) would be increased from a minimum of Rs 10 lakh to Rs 25 lakh. Further, these aggregators would be treated as insurance intermediaries.

If an application for registration is rejected by Irdai or has been withdrawn, the applicant may apply afresh after a financial year has gone by. However, if a foreign promoter or foreign investor has exited for any reason during the preceding two financial years, they would be ineligible to apply.

Web aggregators are entities granted a licence by Irdai and allowed to display insurance product information and comparisons on their sites. Prospective customers can buy products of multiple insurance companies from these portals. However, they are not allowed to sell other financial products on this platform.

With respect to investments, Irdai has proposed that where there are one or more investors in a web aggregator, no investor shall hold shares in exceeding 10 per cent of the paid-up equity capital. Further, all investors jointly cannot hold more than 25 per cent.

Also, while an investor in a web aggregator may be an investor in other such entities, he cannot be a promoter in more than one of these.

On display of product comparisons on a website, Irdai has proposed extending these to unit-linked insurance products. Also, the limit of premium per risk/ per life of products sold on a web aggregator would be revised from Rs 50,000 to Rs 1.5 lakh.

However, the display of a product will not of only the price. It is proposed that the web aggregator display the important features, terms, conditions, exclusions and benefits, too.

An aggregator will to be allowed to charge a flat fee of Rs 50,000 per product and undertake outsourcing activitiess. Similar to other intermediaries, web aggregators are to be asked to have a policy approved by their board of directors on the manner of soliciting and servicing insurance products.