Outsourcing rules for insurance: Here’s what it means for policyholders

By: | Published: August 30, 2016 6:03 AM

The insurance regulator has proposed outsourcing norms where insurers can outsource activities related to premium collection, medical examination, claim investigation, forensic analysis, salvage assessors and recovery agents. Here’s what it means to policyholders:

If the collection of premium is outsourced, insurers will have to put in place procedures for issuance of premium acknowledgments instantly to the policyholders. (Reuters)If the collection of premium is outsourced, insurers will have to put in place procedures for issuance of premium acknowledgments instantly to the policyholders. (Reuters)

The insurance regulator has proposed outsourcing norms where insurers can outsource activities related to premium collection, medical examination, claim investigation, forensic analysis, salvage assessors and recovery agents. Here’s what it means to policyholders:

If the collection of premium is outsourced, insurers will have to put in place procedures for issuance of premium acknowledgments instantly to the policyholders. Insurers will be responsible for the acknowledgements issued and the date and time of such receipt will be considered for the benefits of the insurance contract.

Every insurer will have to direct its in-house Grievance Redressal Machinery to deal with grievances relating to services provided by the outsourced agencies. It will deal with every grievance according to the extant guidelines issued by the insurance regulator. Insurers will have to inform the location where the outsourced service will be performed and the effective period of the outsourcing arrangement.

Insurers will have to mention the performance standards to be attained in respect of the outsourced service and give remedial action and escalation process for dealing with inadequate performance. Mention conditions under which the insurer or outsourcing agency can terminate the outsourcing agreement.

Insurers will have to undertake periodical review of outsourcing strategies and arrangements, and establish a comprehensive risk management programme to cover the risks associated with the outsourced activities.

The insurer will be accountable for all acts of commission and omission of the outsourcing agencies.

The insurer’s liability shall not in any way be restricted or limited by way of outsourcing. Outsourcing activities should be distributed amongst a reasonable number of outsourcing agencies to ensure there is no concentration of risks.

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