MUMBAI: For the first time since they began selling insurance policies in 2002, banks will now be held accountable for mis-selling them.
A bank and its specific employee, found guilty of mis-selling of insurance products, will face action under the new Insurance Act.
The Insurance Regulatory and Development Authority of India (IRDAI) has directed banks to map policies sold by their employees and maintain records that it can access in case of a complaint.
The new law defines corporate agents as intermediaries, representing the customer. “…they have to act in the best interest of the customer,” IRDAI chairman T S Vijayan said.
Earlier, banks were reckoned as agents and representatives of the insurance companiess.
“One of the problems that we encountered when we inspected banks was that they did not have much of an idea about the policies which were procured through them or the employees responsible for the sale. That is one loophole we want to plug in this regulation,” said Vijayan.
Under the new law, the IRDAI chairman said “the policy and whoever is sourcing it will be mapped in the records of the corporate agent”.
While the database will be maintained by the bank, the IRDAI will be provided the credential so that it can remotely log in and inspect the records anytime.
The regulator will have its supervision team in Mumbai, said Vijayan, who was speaking on the sidelines of a ceremony to inaugurate IRDAI’s Mumbai regional office.
The insurance regulator will also come out with regulations on corporate governance. These norms will define management control so that insurance companies can meet the statutory requirement that the management is ‘Indian’.
“We should be able to bring out the guidelines in October”, Vijayan said while inaugurating an ASSOCHAM insurance summit earlier in the day.
The new Act also allows foreign reinsurance companies to set up branches in India. Vijayan said around six international reinsurance companies have shown interest in setting up a branch, of which three are seriously pursuing their plans.