IRDA issues guidelines for life plans sold via common service centres

The Insurance Regulatory Development Authority (IRDA) has framed guidelines for life insurance products to be sold through common service centres (CSCs).

IRDA has directed that the products to be marketed through the common service centre distribution model should be separately pre-fixed with the word CSC to clearly distinguish these products as exclusive CSC products while filing for the product approvals.

In a communication to the life insurers, the regulator has said the maximum commission in the first year (at the time the product is sold) should not be more than 5 per cent of the premium paid in the first year.

''There shall not be any commission payable from the second year onwards and also on the top-up premiums,'' the circular said. The service charges shall be a fixed amount for every activity that would be undertaken, it added.

The regulator has, meanwhile, indefinitely deferred implementation of various provisions in its Standard Proposal Form for Life Insurance. These were to have taken effect from 1 April.

IRDA said this was to facilitate a more comprehensive debate on the contentious provisions. Specifically deferred are implementation of obligations under sections 5, 6, 7, 8, 9 and 10 of the IRDA (Standard Proposal Form for Life Insurance) Regulations 2013. These mandated detailed suitability analysis for customers.

These regulations did not apply to micro insurance products and those distributed through the Common Service Centre channel, it added.

Insurance companies had represented for amendments to the provision. The Standard Proposal Form guidelines recommended a suitability analysis of each customer to be done before selling a policy to him/her. Companies had argued they had internal procedures to ensure the products sold were specific to a customer's need and without the need to fill long forms.

"Based on the suitability of information gathered from the prospect, the insurer or agent or bancassurance or broker or the insurer's employees where direct sales are involved, must have reasonable grounds to believe the product being recommended to the prospect is suitable for him /her," IRDA had stated in its regulations.