IRDA, Finance minister at odds over nod for online sales of insurance policies

The insurance regulator has expressed reservations over the finance ministry's view that firms need not take another approval for insurance products sold online, arguing that such plans need to be assessed differently from those sold through intermediaries.

The ministry is seeking to push online insurance products because it believes that cheaper plans available online can help expand the coverage across the country from the abysmally low 4.4% for life insurance and 0.7% for nonlife insurance.

However, this has led to a difference of opinion between the ministry and the Insurance Development and Regulatory Authority.

"The structure is different because in an e-product there is no commission payable. It is a global practice that the two products require different approvals," said a senior official with IRDA.

The official said that in case of online policies, a record should be maintained as per a pre-set format to ensure that the product sold is what the customer asked for.

"In order to protect the investor interest, it is required that separate approval for online policies is given," the official said. The ministry has refused to buy this argument, though, and asked the IRDA to fix a ceiling for all products and charges per deal.

"Our view is there is no need for a re-approval as it causes unnecessary delays. As far as pricing is concerned, the insurance companies and web aggregators can work that out within the IRDA ceiling," said a senior finance ministry official, requesting anonymity.

Industry players admit that a separate clearance for online policies is a tedious task and often acts as a deterrent.

"If a product can be sold directly or through phone and has the same features, then there is no need for a second approval for an online product," said the chief marketing officer of a private sector insurance firm.

But online web aggregators feel that the conditions laid by the IRDA are too stringent. "At present, we get Rs 30 per lead or 25% of the commission earned on premium. They also need to revisit these norms if the online insurance penetration has to be increased," said an industry player, who did not wish to be named.

Akshay Mehrotra, chief marketing officer of Policybazaar.com, one of the bigger online insurance aggregators, said the online potential was yet to be fully tapped.

"There are only three pure online ULIP (unit-linked insurance plan) products available as of now. Insurance firms also need to develop focused online products for expanding reach," said Mehrotra.

Since the beginning of this month, the firm has sold about 15,000 policies online. As per industry reports, the sale of online insurance has almost doubled over the past year and online insurance industry is expected to touch Rs 1,500 crore by the end of this fiscal.

Most industry players, such as Aegon Religare Life Insurance, Aviva India, HDFC Life, and ICICI Prudential Life Insurance, also have online insurance products.


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