Mis-selling a cause for concern: Irda chairman

Mis-selling of insurance products is a cause for concern and the Insurance Regulatory and Development Authority (Irda) intends to stamp it out, chairman J. Hari Narayan said in an interview. Edited excerpts:

1.You recently launched a consumer helpline on whole life insurance. What has been the response?

It’s early days, but from what we can make out, Irda gets something about 500 complaints a month. Not all of them are dealing with mis-selling, about 20% of them deal with mis-selling, 80% of them deal with other aspects of policy administration. After we started the helpline, this has increased from about 500 a month to 1,500 a month. But it is a bit early. Whether it is only a question of a new venture and therefore people are complaining in, or whether this will be sustained, we will have to see.

2.Is mis-selling a cause of concern for you as a regulator?

I would say that market conduct issues, including mis-selling by insurance companies, is a matter of great concern, not just for the Insurance Regulatory Authority of India, but for the insurance business at large all over the world. We have, for instance, the International Association for Insurance Supervisors and they, too, have brought out standards on market conduct. That’s a matter of major concern across all regulatory domains including, of course, in India.

3.Are you going to make it compulsory for insurance agents to tell consumers how much commission they are getting?

Yes, that is indeed true.

4.In private, chief executives of insurance firms say these are the best measures that could have happened, but publicly they still seem opposed to them..

Yes. I would think that they are apprehensive about the future. These products, which we have mandated based on the new regulations, will be a new type of products. Naturally, if I were a CEO (chief executive officer), I would be worried as to how the public will receive such products, how they would be sold, will it affect the bottomline of the company, and in what way. I would, of course, be concerned about it. But I would say that fair amount of confidence, a fair amount of optimism in the insurance industry and they will meet this challenge quite adequately.

5.I have not come across a single case where mis-selling has been penalised by any regulator, not just Irda. Are you planning on putting together a team that would act on complaints, and if you find evidence, will you take action?

Most certainly. It is incorrect to say that we have not take action against mis-selling. We have, where we have found certain companies have been selling products, which are against what has been cleared under file and use guidelines. We have fined them. At the present moment, the act specifies the maximum fine of `5 lakh for every such incidence and we have fined several companies.

6.Can you give a ballpark figure on how many cases or how many such agents have been hauled up?

I would guess that about a few thousand agents must have been terminated as a result of mis-selling across the industry. That’s a small number considering that the industry has three million agents.

7.You have guaranteed a 4.5% return on a pension policy. But most insurance firms aren’t filing those revised products, still hoping for some change, the logic being that such a policy discourages equity investment. Are you rethinking this policy?

No, there is no rethink on that. You see an insurance product ultimately has to be an insurance product; it has to have an insurance element in it.

There must be some amount of benefit which is guaranteed. When you are working on in an insurance scheme, either you have to guarantee the accumulated phase or you have to guarantee the pension outgo. I will be uncomfortable with the proposition that we should have a pension product which has no inbuilt insurance of any kind, no guarantee of any kind.

Within the insurance space also, if companies are unwilling to give the 4.5% as a pension product, we have products such as standard Ulip (unit-linked insurance plan) products where a life cover is built in, so those products could be offered. So, a range of options exists for the insurance companies and they will have to make the call.

8.You have come out with a new set of guidelines over the last few months for Ulips. For traditional plans, are you looking at implementing a charge cap?

Traditional plans and traditional insurance policies in India have a long history; they go back over 100-110 years. So, I would be very wary about making structural changes in them. I would need to examine it very carefully because we have the weight of experience and the knowledge gained by experience for which there is no substitute before we start reengineering these products. They have stood the test of time.

9.On cashless transactions for medical insurance, your stand has been that this is a commercial agreement. Do you still hold that stand?

At the onset, let me say I think the matter will be resolved and I think most of it has already been resolved. What I think the insurance companies were pointing out is that there has to be a consistency in the payment pattern of hospitals.

The same hospital cannot be charging differential rates for the same procedure merely by the difference in the mode of payment, or by the parties making the payment.

That’s what the record seems to suggest they are doing. I don’t think that’s a healthy practice.