To make insurance products popular and increase the penetration of both life and non-life insurance, the Insurance Regulatory and Development Authority (Irda) has issued new guidelines allowing insurers to use licensed Common Service Centres (CSCs) as distribution networks in rural areas.
These centres will enable insurance companies to market certain categories of retail policies through a special-purpose vehicle with the help of a Rural Authorised Person (RAP), who, in turn, will act as an insurance agent.
Irda has said the RAPs will assist the prospect in selecting a policy based on his need and obtain detailed information relating to proposers/persons/risks to be insured and protection needs and give advise on the appropriate insurance cover.
Moreover, the RAPs will provide the insurer with underwriting information like age, income, family medical history, any illness suffered and any other information required for risk assessment.
They will have to assist the prospect in paying premiums and advise in effecting nomination, assignment and other policy services. Most importantly, the RAPs will have to assist in and facilitate the claim-settlement process by helping the insured person in filing the claim form correctly and collecting copy of documents like death certificate, nomination and any other document required for the speedy settlement of the claims by the insurance company.
The RAPs will have to undergo 20 hours of mandatory training and register on the Learning Management System website. The online examination of RAPs will be conducted by the National Institute of Electronics and Information Technology, which is an autonomous scientific society of the government's Department of Electronics and Information Technology.
The CSC model is an initiative of the National e-Governance Plan and will operate in rural areas without access to internet. The plan provides services like e-governance, education and utility payments and works on the public-private partnership model.
Insurance companies will have to develop insurance products to be marketed exclusively through the CSC model and file the products for approval with Irda. These products will have a sum assured per life or risk of not more than R2 lakh, except for motor insurance. Analysts say the model will help insurance companies develop low-cost insurance cover and customise the products according to needs of a particular area or the insured.
A grievance redressal mechanism will have to be set up at both the common service centre-special purpose vehicle (CSC-SPV) and the insurer level, and the insurers will have to submit a Complaint Redressal Analysis report to the regulator every quarter.
The regulator has mandated that RAPs will provide necessary assistance to the policyholders, claimants or beneficiaries in complying with the requirements for settlement of claims by the insurer and forward any information received from the client regarding a claim or an incident that may give to a claim without any delay.
Also, if there is any delay on the part of the insurer to settle the claim, the RAPs will have to inform the policyholder accordingly. To increase persistency, the RAP will have to ensure remittances of premiums by policyholders within the stipulated time by giving them notice well before time, both orally and in writing.
The RAPs cannot solicit or process insurance business without holding a valid licence or certificate and cannot induce the prospect to omit any material information in the proposal form. Moreover, the RAPs cannot offer different rates, advantages, terms and conditions other than those proposed by the insurer. They also cannot force a policyholder to terminate the existing policy and to effect a new proposal from him within three years from the date of such termination. “These norms will reduce misselling of life and non-life insurance which are high commission-linked,” says Subodh Sharma, an independent insurance advisor.
The regulator has the right to cancel or suspend the licence of the CSC-SPV after due notice if the RAP violates the provisions of the Insurance Act or the Irda Act, 1999, or fails to furnish any information relating to its activities as a CSC-SPV as required by the regulator. The licence can also be cancelled if the CSC-SPV furnishes wrong or false information or conceals or fails to disclose material facts in the application submitted for obtaining a licence. Insurers say the new guidelines will make the micro-insurance products more transparent and policyholder can benefit in the long run.