On- line direct selling of Insurance Vis-à-vis Section 41 of Insurance Act,1938

                                         Reg: with A/D                                                                                                                                                                 Oct 20, 2014                                                                        Shri  T.S.Vijayan                                                                                                                        

Chairman, IRDA

Parishram Bhavn (3^rd floor)

Basirbagh

Hyderabad- 500 004

                                                                                                                         

Dear Sir,

Sub: On- line direct selling of Insurance  Vis-à-vis  Section 41 of Insurance Act,1938 

Government appointed panel (chaired by shri D. Swarup) FINWEB’s recommendations on the common    minimum standards for millions sellers of Insurance, pension and mutual fund products has been put in the shelve to settle dust on it.

“Agents commission embedded in the premium be cut” was one of the recommendations made by the panel (FINWEB).

 But Shri J. Hari Narayan ,IRDA Chairman then had strongly opposed the proposal to remove agents commission from policyholders premium.

An earlier panel set up by High Level committee on Financial Matters (HLCFM) and chaired by the  former IRDA  chief C.S. Rao also favoured continuing the existing arrangements for financial intermediaries . But it is observed that the Nationalized Insurer LICI and private Insurers both, in contradiction of above, have been operating on-line selling of Insurance directly to the Insuring  public at reduced premium .The amount of this reduction in premium is more than agents commission embedded in the tabular premium. Subsequent premium under ‘on-line policies’ remain same whereas agents get commission @5% on subsequent premium of the policies Sold by them.

Now the questions arise:

1.       Did IRDA grant any  license to Insurers for selling of Insurance directly to Insuring Public ?

2.       Does Insurers  not  create a discrimination between the ON-LINE  policyholders and     AGENTS-SOLD policy holders?                                                             

3.       All  Insurance both life & non- life  print in their proposal forms about ‘prohibition of rebate’ quoting the provisions under section 41 of Insurance Act,1938.

 Why will IRDA not treat the ‘On-line direct selling’ of Insurance at reduced  premium as Rebating and   take proper action?

Decades back G.I.C controlled PSU  Companies depriving agents from commission ,would allow a discount  (equal to agents commission) to the policy holders on the premium of their assigned policies.

Attention of N. Rangachari ,  then Chairman IRA ,was drawn to this aspect  in a seminar held on 13.11. 1998 at Kolkata . He had treated the matter as a serious violation of Insurance Act 1938 (Section 41) and took action immediately  after his return to H.Q resulting discontinuation of the years old malpractice . And thereafter  Insurers  started paying  commission to agents also on  assigned policies.

Millions of Life Insurance agents in the country urge upon you to maintain sanctity of the Insurance Act and STOP ON- LINE SELLING .

Eagerly looking forward to your early action .

Thanking You .

Yours Faithfully,