Daijiworld Media Network - Mumbai
Mumbai, Jun 30: Insurance Regulatory and Development Authority of India (IRDAI) Chairperson Ajay Seth on Tuesday announced that the insurance regulator will soon introduce fresh guidelines for banks to prevent the mis-selling of insurance products, aiming to strengthen consumer protection and improve sales practices.
Speaking to reporters at an event in Mumbai, Seth said the regulator is finalising the new framework, which is expected to ensure that insurance products are sold based on customers' needs and suitability rather than sales targets.
He also revealed that the much-awaited Bima Sugam digital platform is likely to be launched by September this year. The online marketplace will initially offer motor insurance products before gradually expanding to include health insurance and term life insurance policies.
The unified platform is intended to simplify the purchase, servicing and management of insurance policies by providing customers with a single digital interface.
Commenting on foreign investment in the insurance sector, Seth said one foreign insurer has already received regulatory approval to increase its stake in an Indian life insurance company, while another proposal is currently under examination.
His remarks come after the Central government recently notified 100 per cent Foreign Direct Investment (FDI) under the automatic route for the insurance sector, a move aimed at attracting greater overseas investment and enhancing competition.
Under the revised policy, foreign investment in insurance companies will remain subject to the provisions of the Insurance Act, 1938, along with mandatory approval from the IRDAI for carrying out insurance and related business activities.
However, the Life Insurance Corporation of India (LIC) will continue to operate under a separate regulatory framework, with foreign investment capped at 20 per cent through the automatic route.
The revised FDI policy also permits 100 per cent foreign investment under the automatic route in insurance intermediaries, including brokers, reinsurance brokers, insurance consultants, corporate agents, third-party administrators, surveyors and loss assessors, managing general agents and insurance repositories, in accordance with IRDAI regulations.
Seth further said the regulator is working on a new product suitability framework that will encourage insurers and distributors to recommend policies based on customer requirements. Instead of imposing rigid regulations, the framework is expected to provide illustrative guidance to improve responsible selling practices.
He also noted that IRDAI has recently granted another general insurance licence, marking the second such approval in recent months as the regulator seeks to expand competition in the sector.
Highlighting ongoing regulatory reforms, Seth referred to the authority's recent decision to tighten norms governing the remuneration of senior executives in insurance companies. Under the revised framework, bonuses and incentives for Key Management Personnel (KMPs), including chief executive officers, will be linked to measurable performance indicators such as claim settlement efficiency, grievance redressal, customer service standards, product performance and transparency in disclosures.