An advertisement will be labeled as misleading if it omits to disclose or discloses insufficiently, important exclusions, limitations and conditions of the policy
In order to ensure that insurers and intermediaries adopt fair, honest and transparent practices while issuing advertisements and avoid practices that tend to impair the confidence of the public, the insurance regulator has issued the Insurance Regulatory and Development Authority of India (Insurance Advertisements and Disclosure) Regulations, 2021. Insurers and their intermediaries will have to ensure that advertisements are relevant, fair and in simple language which can enable people to take informed decisions.
Last year, the regulator said evolutionary trends coupled with technological developments have changed the medium of advertising necessitating the review of existing advertisement regulations. The IRDAI (Insurance Advertisements and Disclosure) Regulations, 2000 were notified in 2000. Two minor amendments were done in 2010 and 2015.
An advertisement will be treated as unfair or misleading if it makes claims beyond the ability of the policy to deliver, describes benefits that do not match the policy provisions and uses words or phrases in a way which hides or underplays the risks inherent in the policy. An advertisement will be labeled as misleading if it omits to disclose or discloses insufficiently, important exclusions, limitations and conditions of the policy; illustrates future benefits on assumptions which are not realistic nor realisable in the light of the insurer’s current performance; or deviates from the stipulation by the authority through regulatory provisions.
Every insurer, intermediary or insurance intermediary will have a compliance officer, whose name and official position in the organisation will have to be communicated to the regulator. Every advertisement by an insurance agent will have to be approved by the insurer in writing prior to its issue. The insurer will have to ensure that all advertisements that pertain to the company, its products or performance comply with these regulations and are not deceptive or misleading. However, an insurance agent will not have to take written approval of the company if the advertisements are developed by the insurer and provided to them.
The website of every insurer, intermediary or insurance intermediary will have to contain disclosure statements which outline the website’s specific policies regarding the privacy of personal information for the protection of both their own businesses and the consumers they serve. The insurers will have to ensure that the recipients can see the full text of the relevant key features, coverage and exclusions; relevant terms and conditions; any other applicable risk information and they shall not be hidden away in the body of the text. In case of e-mail communications there should be a provision to unsubscribe from the mailing list.
The regulations make it clear that insurers cannot allow a third party to distribute information about an insurance policy on its letterhead or envelope or through any mode or medium including mail system unless the third party is providing only a distribution service for the advertisement and is not itself soliciting the insurance. The third party cannot recommend purchase of specific insurance products through advertisements.
Insurers and intermediaries will have to publish claims paid ratios or any other parameters specified by the regulator. Any claim of rating or award will be based only on those declared by entities which are independent of the insurer, intermediary or insurance intermediary and its affiliates.
Insurers can neither pay nor procure services from independent entities to get a rating or award and the source of rating or award received will have to be disclosed legibly in advertisements. Most importantly, in advertisement insurers cannot make a claim of ranking as regards its position in the market based on criteria such as premium income, number of policies, branches, claims settlements etc.