CUSTOMER CUSTOMER SERVICE -SERVICE -

REGULATORY REGULATORY VIEWVIEW

By By

PC James PC James

Executive Director, IRDAExecutive Director, IRDA

Underdeveloped Markets

Emerging Markets

Mature Markets

•Motor insurance (3rd party liability)

• property insurance for large gov’t projects

• Marine and othertrade related

transport insurance • Commercial property insurance

Motor insurance(comprehensive)

•

• Liability insurance for businesses

Liability insurance for

individuals •• credit and financialinsurance for businesses

Accident, Health and Disability

insurance for individuals •

Level of Economic Development (GDP per head)

Higher Spending on Insurance per head

ECONOMIC DEVELOPMENT & GROWTH OF NON LIFE INSURANCE PRODUCTS

• Business interruption ( consequential loss) insurance

From protection of physical assets to protection of income and financial assets

Growing customer awareness,

expectations

Growing customer awareness,

expectations

Increasing Product-Price Complexity and Flexibility,

ART, Derivatives

Increasing Product-Price Complexity and Flexibility,

ART, Derivatives

,

Disintermediation and

Reintermediation

,

Disintermediation and

Reintermediation

Regulatory Mission,Competition,

International Benchmarks,

Regulatory Mission,Competition,

International Benchmarks,

Changing Pricing scenario /

De-tariffing

Changing Pricing scenario /

De-tariffing

Rapid rate of technology

advancements & innovation

Rapid rate of technology

advancements & innovation

Convergence of Institutions,

Instruments, Intermediaries

Convergence of Institutions,

Instruments, Intermediaries

Insurance Industry

New Business Models

New Business Models

CHALLENGING CHALLENGING ENVIRONMENTENVIRONMENT

Mission of IRDA

To protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance

industry and for matters connected therewith or incidental thereto.

FUNDAMENTALS OF AN FUNDAMENTALS OF AN IDEAL REGULATORY IDEAL REGULATORY

ENVIRONMENTENVIRONMENT

• PROTECTION OF THE CONSUMERPROTECTION OF THE CONSUMER• PROMOTION OF THE INDUSTRYPROMOTION OF THE INDUSTRY• COMPETITIVE NEUTRALITYCOMPETITIVE NEUTRALITY• TRANSPARENCYTRANSPARENCY• COST EFFECTIVENESS COST EFFECTIVENESS • ACCOUNTABILITYACCOUNTABILITY• FLEXIBILITYFLEXIBILITY

PROTECTIONPROTECTION

• ESTABLISH A REGULATORY ESTABLISH A REGULATORY FRAMEWORK TO PROVIDE FRAMEWORK TO PROVIDE ADEQUATE PROTECTION TO ADEQUATE PROTECTION TO CONSUMERSCONSUMERS

• PREVENT /ENFORCE SUCH PREVENT /ENFORCE SUCH REGULATIONSREGULATIONS

• INSTIL PUBLIC CONFIDENCEINSTIL PUBLIC CONFIDENCE

PROMOTIONPROMOTION

** Provide a favourable climate for Provide a favourable climate for product development/intermediation product development/intermediation and healthy growth of insuranceand healthy growth of insurance

-- A reliable and stable marketA reliable and stable market-- Freedom of entrepreneurial Freedom of entrepreneurial

spiritspirit** Balance between degree of Balance between degree of

prudential regulation and degree of prudential regulation and degree of freedomfreedom

COMPETITIVE COMPETITIVE NEUTRALITYNEUTRALITY

** Level playing field for all participantsLevel playing field for all participants

** Minimal entry and exit barriersMinimal entry and exit barriers

** No undue restrictions on institutions No undue restrictions on institutions or productsor products

** Well – defined rules of gameWell – defined rules of game

SOURCES OF SOURCES OF REGULATIONSREGULATIONS

** Laws / Statutes Laws / Statutes - Government - Government

** Formal Regulations Formal Regulations - Regulations - Regulations

• Non-formal Regulations - GuidelinesNon-formal Regulations - Guidelines

• Self-regulation - IndustrySelf-regulation - Industry• Internal Regulation - Corporate Internal Regulation - Corporate

Governance Governance

LAWLAW• MAKES GENERAL FRAMEWORK MAKES GENERAL FRAMEWORK

FOR THE INDUSTRYFOR THE INDUSTRYEG. INSURANCE ACT 1938EG. INSURANCE ACT 1938

IRDA ACT 1999IRDA ACT 1999

REGULATORREGULATOR• Issues specific rules & regulationsIssues specific rules & regulations• Responsibility for enforcementResponsibility for enforcement

JUDICIARYJUDICIARY

** Decide on suitsDecide on suits

** Give interpretationsGive interpretations

** Decide on the legality of an Decide on the legality of an insurance practiceinsurance practice

INSURANCE POLICY – FILE & INSURANCE POLICY – FILE & USEUSE

- policy to confirm to requirements policy to confirm to requirements imposed by statute/regulationimposed by statute/regulation

- policy to be consistent, not policy to be consistent, not ambiguous, misleading, unfair or ambiguous, misleading, unfair or inequitableinequitable

- the benefits provided are the benefits provided are reasonable in relation to the reasonable in relation to the premium chargedpremium charged

DESIRABLE DESIRABLE REQUIREMENTSREQUIREMENTS

• Standardisation of clausesStandardisation of clauses• Simplification of terms & Simplification of terms &

coveragescoverages• Full disclosureFull disclosure• Avoidance of misleading/confusing Avoidance of misleading/confusing

clausesclauses• Definitions of termsDefinitions of terms• List of Policy Prohibitions List of Policy Prohibitions

including list of permissible including list of permissible exclusionsexclusions

SELLING METHODSSELLING METHODS

• LICENSING OF AGENTS / LICENSING OF AGENTS / INTERMEDIARIESINTERMEDIARIES

• AGENTSAGENTS• CORPORATE AGENTSCORPORATE AGENTS• BACASSURANCEBACASSURANCE• BROKERSBROKERS• SURVEYORSSURVEYORS• TPASTPAS

•ADVERTISINGADVERTISING

POLICYHOLDER PROTECTION POLICYHOLDER PROTECTION REGULATIONSREGULATIONS

• POINT OF SALE – PROSPECTUSPOINT OF SALE – PROSPECTUS• PROVIDE ALL MATERIAL INFORM -PROVIDE ALL MATERIAL INFORM -

ATION TO DECIDE THE BEST COVERATION TO DECIDE THE BEST COVER• FOLLOW CODE OF CONDUCTFOLLOW CODE OF CONDUCT• PROPOSAL OF INSURANCEPROPOSAL OF INSURANCE• GRIEVANCE REDRESSAL GRIEVANCE REDRESSAL

PROCEEDUREPROCEEDURE• MATTERS TO BE STATED IN POLICYMATTERS TO BE STATED IN POLICY• CLAIMS PROCEEDURECLAIMS PROCEEDURE• POLICYHOLDER SERVICINGPOLICYHOLDER SERVICING• DUTY OF INSUREDDUTY OF INSURED

INSURANCE INSURANCE OMBUDSMANOMBUDSMAN

• INSURANCE OMBUDSMAN EXISTS INSURANCE OMBUDSMAN EXISTS FOR SPEEDY, CONVENIENT FOR SPEEDY, CONVENIENT REDRESSAL OF GRIEVANCES OF REDRESSAL OF GRIEVANCES OF INSURED THAT TOO AT MINIMUM INSURED THAT TOO AT MINIMUM COSTS.COSTS.

• OMBUDSMAN CAN DEAL WITH OMBUDSMAN CAN DEAL WITH PERSONAL LINES CLAIMS PERSONAL LINES CLAIMS (INCLUDING HEALTH INSURANCE) (INCLUDING HEALTH INSURANCE) UP TO RS.20 LACS.UP TO RS.20 LACS.

GRIEVANCE ISSUE GRIEVANCE ISSUE PROCESSESPROCESSES

• SETTLING INDIVIDUAL SETTLING INDIVIDUAL GRIEVANCES GRIEVANCES

• ANALYSIS OF GRIEVANCESANALYSIS OF GRIEVANCES• CATEGORISING GRIEVANCESCATEGORISING GRIEVANCES

1.1. DELAYDELAY

2.2. STRUCTURAL/SERVICE ISSUESSTRUCTURAL/SERVICE ISSUES

3.3. POLICY/ CONTRACT ISSUESPOLICY/ CONTRACT ISSUES

REMOVING ROOT REMOVING ROOT CAUSESCAUSES

• ANALYSING ROOT CAUSESANALYSING ROOT CAUSES• STUDY OF RULINGS, STUDY OF RULINGS,

JUDGEMENTSJUDGEMENTS• EMPOWERED LEVELS TO TAKE EMPOWERED LEVELS TO TAKE

CORRECTIVE ACTIONCORRECTIVE ACTION• REVIEW RESULTSREVIEW RESULTS• CHANGE OF PRACTICES, CHANGE OF PRACTICES,

SYSTEMS, PRODUCTSSYSTEMS, PRODUCTS

IRDA GRIEVANCE CELLIRDA GRIEVANCE CELLDEPARTMENT WISE NON LIFE COMPLAINTS

RECEIVED(APR'05-MAR'06)

FIRE6%

MARINE2%

MOTOR25%

HEALTH48%

OMI15%

OTHERS4%

IRDA GRIEVANCE CELLIRDA GRIEVANCE CELL

SOURCEWISE COMPLAINTS RECEIVED (APR'04-MAR'05)

Individuals87%

Company 13%

IRDA GRIEVANCE CELLIRDA GRIEVANCE CELLNATUREWISE CATEGORISATION OF COMPLAINTS RECEIVED

DURING APR'05-MAR'06

52%

17%

27%4%

NON SETTLEMENT / DELAY INSETTLEMENT OF CLAIM

REPUDIATION / PARTIALSETTLEMENT OF CLAIM

POLICY ISSUES

OTHER REASONS

IRDA’S CONCERNSIRDA’S CONCERNS

PROHIBITED SALES PRACTICES PROHIBITED SALES PRACTICES AND UNETHICAL INTERMEDIATIONAND UNETHICAL INTERMEDIATION

MISLEADING ADVERTISEMENTSMISLEADING ADVERTISEMENTS

FAILURE TO PROVIDE PROPERFAILURE TO PROVIDE PROPER

DISCLOSURESDISCLOSURES

INSENSITIVITY TO CONSUMER INSENSITIVITY TO CONSUMER

WELFAREWELFARE

DELAYSDELAYS

THE WAY FORWARDTHE WAY FORWARD1.1. TIMELINESS. DECREASE PROCESS TIMELINESS. DECREASE PROCESS

DELAYS DELAYS 2.2. NEED FOR CLARITY & QUALITY IN NEED FOR CLARITY & QUALITY IN

COMMUNICATIONCOMMUNICATION3.3. CREATE PROCEDURES FOR QUICK CREATE PROCEDURES FOR QUICK

DECISION MAKINGDECISION MAKING4.4. CONVEY WRITTEN DECISIONS & IF CONVEY WRITTEN DECISIONS & IF

NEGATIVE WITH REASONS NEGATIVE WITH REASONS 5.5. RECORD REASONS IN FILERECORD REASONS IN FILE6.6. INFORM AVAILABILITY OF EXTERNAL INFORM AVAILABILITY OF EXTERNAL

REMEDIES IF NOT RESOLVED REMEDIES IF NOT RESOLVED INTERNALLY.INTERNALLY.

7.7. USE PROCEDURES THAT INCREASEUSE PROCEDURES THAT INCREASE CONSUMER ACCESSCONSUMER ACCESS

THANK YOUTHANK YOU