Irdai seeks comments on draft norms on outsourcing activities

Irdai has proposed regulations for outsourcing of non-core activities supporting policy servicing and premium collection for insurance companies and contingency plan to deal with any untoward development.
IRDAI (Outsourcing of Activities by Indian Insures) Regulations is aimed to ensure that insurers follow prudent practices on management of risks arising out of outsourcing with a view to prevent negative systemic impact and to protect the interests of the policyholders.
The Insurance Regulatory and Development Authority of India (IRDAI) also aims to ensure sound and responsive management practices for effective oversight through these regulations.
The draft said insurer is prohibited from outsourcing 'core activities' like investment, fund management, compliance with AML and KYC, and product designing and policyholders grievances redressal.

It further said that while policy servicing remains a core activity for the Insurer who is totally responsible for the services rendered, however, "the activities that support policyholder servicing may be outsourced".
The draft also proposes that where collection of premium is outsourced, insurers should put in place procedures for issuance of premium acknowledgments instantaneously.

The insurers are also expected to establish and maintain adequate contingency plans.
"This includes disaster recovery plans and backup facilities to support the continuation of an outsourced activity with minimal business disruption in the event of reasonably foreseeable events that affect the ability of an Outsourcing Service Provider to continue providing the service," the draft said.

Irdai has invited comments on the revised draft on outsourcing of activities by insurers by February 7. It had issued the initial draft in August last year.