Insurers seek clarity on other financial products | The Financial Express

Insurers seek clarity on other financial products

The department of financial services has proposed that an insurer may also distribute other financial products as specified by and subject to the regulations. 

Insurers seek clarity on other financial products
A number of suggestions have been received to enhance insurance penetration, improve efficiency, and enable product innovation and diversification. (File)

With the finance ministry proposing to allow the insurance companies to distribute other financial products, the industry has sought more clarity on it. The details on the government’s move aimed at enabling newer channels of distribution are still awaited.

“We are seeking more details about it. We are not aware of what that particular section means. We are still to understand what does that other financial products distribution mean,” a senior executive of a major insurance company told FED, on the condition of anonymity.

The department of financial services has proposed that an insurer may also distribute other financial products as specified by and subject to the regulations. 

“We don’t have 100% clarity. What they are (finance ministry) talking about like as banks are distributing insurance products, so insurance companies may also distribute other financial products like banking and mutual fund products. It is my personal speculation. I don’t know what actually be allowed. We need more clarity,” said another senior executive of a large insurance company. 

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Notably, according to the proposed amendments, an insurer may also provide services related or incidental to insurance business. Insurance industry insiders said by introducing this new provision, companies may be allowed to provide “value-added services” to their customers. 

“Under the value-added services, a general insurance company may want to give a wellness package or some travel-related packages or benefits to its customers. Outpatients consultations or some diagnostic tests may be the value-added services that an insurance company can provide. The company can sell it independently, not along with the insurance products. They can charge for providing the services,” one of the executives cited above explained.

The department of financial services said in view of the changing needs of the insurance sector, a comprehensive review of the legislative framework governing the sector has been done in consultation with insurance regulator Irdai and the industry. A number of suggestions have been received to enhance insurance penetration, improve efficiency, and enable product innovation and diversification.

“The proposed amendments primarily focus on enhancing the financial security of the policyholders, promoting policyholders’ interests, improving returns to the policyholders, facilitating entry of more players in insurance market leading to economic growth and employment generation, enhancing efficiencies of the insurance industry -operational as well as financial and enabling ease of doing business,” it pointed out. 

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“The proposal includes various measures such as opening up registration to various classes, sub-classes and types of insurers with appropriate minimum capital requirements as specified by Irdai, allowing services to insurers that are incidental or related to insurance business as well as distribution of other financial products as specified by Irdai, enabling newer channels of distribution, providing for efficient use of capital and resources, etc,” it added. 

The ministry has invited comments and suggestions on proposed amendments to the Insurance Act, 1938 and Insurance Regulatory and Development Authority Act, 1999 by December 15, 2022. 

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First published on: 07-12-2022 at 06:15 IST