IRDA bringing in transparency in tying and bundling insurance products

The move by the insurance regulator is in the interest of customers as it would bring transparency in the way insurance is pushed by intermediaries. Many times the customer does not even know the insurance company’s name whose product he may be forced to buy

Insurance Regulatory and Development Authority (IRDA) has come out with a discussion paper which details the aspects of tying and bundling insurance products. Insurance mis-selling or forced selling is a reality that cannot be easily wished away. Often, the customer ends up with a product with little knowledge of insurance company as there may not be a choice. “White labeling” of insurance products makes it difficult for customers to differentiate between the core product and the incidental one. There is a conflict of interest in most of these cases as the seller is often a corporate agent or their group entities are insurance brokers. These areas, therefore, need attention from the consumer-protection point of view.

Buying a new car usually ends up with the auto dealer pushing the insurance product of his choice down the customer’s throat. The product is from the insurance company which gives a hefty discount for getting volume sales, which the dealer undertakes. Life insurance against home loans is classic example of a customer either taking what the bank offers or going to another bank. There is no other option. In both these examples, the intermediary commission is paid by the insurance company.

According to Avadhoot Mavlankar, principal officer at Shinrai Insurance Broking, “This is not new to the insurance market. The classic example was a credit card, which used to have in-built personal accident cover. But its shortcomings were discovered when there were serial blasts in the Mumbai local trains. The personal accident policy did not cover terrorism. Tying and bundling insurance policies with other services is mostly coming as a mandatory requirement especially by banks; which is not a healthy practice.”

Arvind Laddha, chief executive officer of Vantage Insurance Brokers and Risk Advisors, brings another perspective. According to him, “Tying or bundling of products helps customers by reducing the transaction effort and also opens the possibility of some savings for them. However, occasionally we do see that the insurance intermediary is able to exercise undue influence on the customer, due to the extended relationship they enjoy. The regulator should consider allowing the distributor to bundle the insurance product but should ensure that the customer can transparently see the value he is getting. It may also be appropriate to issue guidelines that do not allow a bundled product to be highlighted largely as an insurance product, as it could result in formation of groups with a view to merely enjoy the benefits of bulk purchase of insurance.”

According to Kamalji Sahay, managing director and chief executive officer, Star Union Dai-ichi Life "Bundling of products evolved for adding more value for the customer through one life insurance policy.  In fact, this offers the customer better benefits than what he would be able to receive through a core product.  This suits the need of large number of customers; of course, not every customer." Moneylife tried contacting several other insurance companies to get feedback on IRDA initiative, but there was no response till the time of writing this article.

IRDA’s discussion paper comes down heavily on group insurance covers that are bundled with mutual fund products. According to the insurance watchdog, “One of the concerns that arise here is the manner in which this is advertised by the service provider. Providing information regarding the insurance cover is okay but highlighting that more than the core service being provided misleads the public. This violates the IRDA (Insurance Advertisements) Regulations, 2000. The insurance cover will have to be incidental to the other financial product.  There could be instances where the public is led to believe that the insurance cover is the main feature of the product that is being sold.”

Mr Mavlankar says, “Some insurers who have big retail outlets have tried it through mall assurance, but it has not been successful. IRDA should come up with very clear guidelines and should specify the minimum cover such policies should offer, further the drafting of such policies should also be simple.”

Tying is defined as two or more products packaged together where at least one of the products is not sold separately while bundling occurs when products are packaged but are also available separately. The discussion paper is a great initiative from IRDA which will delve whether it should stop bundling of insurance products with other goods or services or allow this activity with some checks built-in. IRDA has sought feedback on its discussion paper, which is available on its website  Kindly mail your opinion to [email protected] on or before 15 March 2012.




5 years ago


My Medical Insurance claim approx. Rs.9000/-(Nine thousand) is rejected by New India Assurance -ho-Mumbai.

In spite of informing -in advance daycare surgical procedure with surgeon's letter -it took over TEN days for TPA Medi assist to reply on my intimation after 3/4 reminders.

Once claim is submitted-TPA and new India -ro/bo/zo/ho ALL OF THEM has rejected my cliam since I did not stayed over 24 hrs in hospital.(Medically it was not required as certified by treating doctor.)

Complain was lodged with IRDA as per format and ack.received on 28th Jan 2012.Its now ONE MONTH whenever called up IRDA call center-NO REPLY-NO COMMITTMENTS.JUST ASKING ME TO WAIT.It appears that complaints lodged with IRDA is a total waste.( call center also appears to be OUTSOURCED !!!!!)

I WONDER WHAT WILL HAPPEN TO MY health and life INSURANCE claims-if rejected by Insurance co.on some flimsy grounds ?

Should a common man trust IRDA ??

Does it also indicate that policy holder should INFLATE HOSPITAL BILLS in association with hospitals and doctors to get higher amount of medical claim re-imbursed ??


5 years ago

I am planning to buy a new car. The dealer quotes the ‘on road’ price. The ‘on road’ price includes tax, registration and insurance. I want to take an insurance of my own choice. Is it possible? Can a buy insurance without an agent. If yes, how?


P M Ravindran

In Reply to Vasudev 5 years ago

You can simply go to a general insurance company and take the policy but them you read the certificate and it will have an agent code added! Possibly there is a surreptitious deal to give the agent's commission to some selected agents on a list maintained for the purpose!.


5 years ago

I have no faith in IRDA.. My personal experience is very bad in case of Reliance Isurance Policy complain.


Deepak R Khemani

In Reply to CBPATHAK 5 years ago

Why don't you share your full experience with others, it may help others decide on taking policies from Reliance Insurance

P M Ravindran

5 years ago

In India I am aware that a lot of cheating goes on in the name of insurance. The agents make your life miserable offering the moon till you buy a policy and then vanish like thin air and when you submit a claim then again hell is let loose!

In the case of an educational loan, a bank, apart from taking collateral security in the form of land deeds, also insisted on personal insurance of the student availing the loan! Between the interest and the insurance premium, there is a lot of drain on the finances!

Then in a case without bundling, in the case of a health insurance claim of a subscriber who got afflicted with Glio Blastoma Multiforme, the company company initially rejected the hospital bills saying that radiation is an OP treatment procedure and later rejected the bills for the follow up chemo treatment saying that there was no hospitalisation!


Deepak R khemani

In Reply to P M Ravindran 5 years ago

Can you please name the company sir, it will help others in keeping away from them, people are very active on Social media nowadays, creates a very band reputation for the company.

P M Ravindran

In Reply to Deepak R khemani 5 years ago

The bank is PNB, the insurance company is New India Assurance Company and their TPA, TTK Health Care Services Pvt Ltd. The 1st claim rejected by TPA was finally cleared by the Insurance company. The 2nd claim is pending action by the insurance company.


5 years ago

My friend bought a Mercedes Benz recently. The dealer quoted RS.120000/. He went to site called and was bale to get it around Rs.80000/- including a bumper to bumper cover, covering plastic parts and no depreciation. H e had a hard time convincing the dealer to give a quote without insurance. Most of the consumers do not know insurance is deregulated and hence concentrate on the price of the car. The dealer reduces teh price but makes it on insurance commission


Vikas Gupta

In Reply to ragan 5 years ago

I totally agree with Mr. Ragan. Dealers must quote Car Prices with & without Insurance. Customers must be given options to have insurance coverage by themselves.

Minor gains on the cards but the trend is still down: Friday Closing Report

Nifty may move in the range of 5,390-5480 unless the uptrend resumes

The market settled lower on institutional selling in blue-chips, which resulted in the capital goods, realty and banking sectors ending as the biggest losers today. Today’s closing finally broke the seven-week rally, the first weekly close in the negative since the beginning of 2012.

As we guessed yesterday, today the Nifty slipped below 5,425 and closed a tad above that level. The decline in the past three days may now lead to some buying. But any rally may be met with selling. From here, if the pattern of a lower low and lower high continues, as it did today for the second consecutive day, we may the Nifty finding support at 5,390. At the higher level, index may get resisted in the 5460-5480 area. The National Stock Exchange (NSE) saw a volume of 102.82 crore shares.

Despite positive cues from its global peers the domestic market opened flat for the second day. US stocks closed higher overnight on better-than-expected economic news which also boosted the Asian pack in early trade today. The Nifty opened four points lower at 5,479 and the Sensex was unchanged from its previous close at 18,079.

Initial across-the-board buying saw the indices touching their intraday highs in early trade. At the highs, the Nifty rose to 5,521 and the Sensex climbed to 18,198. However, institutional selling soon led the market into the negative.

News of Citigroup selling its entire stake in mortgage lender HDFC and Etisalat’s exit from the telecom joint venture with DB Realty pulled down individual stocks. Among the sectoral gauges, capital goods, realty and banking suffered the most today.

The losses kept expanding as trade progressed with the market falling to its mid-session low in post-noon trade with the benchmarks dipping below their psychological levels.  At the lows, the Nifty slipped to 5,406 and the Sensex dropped to 17,849.

A minor recovery in the dying minutes enabled the market close off the lows. At the end of trade, the Nifty closed 54 points lower at 5,429 and the Sensex was down 155 points at 17,924. Nifty futures was trading at 40-50 points higher which shows remarkable optimism among the bulls. This alone would be a reason for the market to remain under pressure.

The advance-decline ratio on the NSE was negative at 561:1224.

Among the broader indices, the BSE Mid-cap index fell by 0.64% and the BSE Small-cap index dropped 0.71%.

BSE Metal (up 1.08%); BSE TECk (up 0.56%); BSE IT (up 0.55%); BSE Consumer Durables (up 0.31%) and BSE Fast Moving Consumer Goods (up 0.28%) were the sectoral gainers today. The main losers were BSE Capital Goods (down 2.96%), BSE Realty (down 2.28%); BSE Bankex (down 1.95%); BSE Oil & Gas (down 1.71%) and BSE PSU (down 1.22%).

The top-five Sensex stocks were Sterlite Industries (up 3.83%); Tata Power (up 2.10%); Coal India (up 1.47%); Bharti Airtel (up 0.96%) and Tata Steel (up 0.95%). The main losers were HDFC (down 3.83%); DLF (down 3.44%); Larsen & Toubro (down 3.38%); BHEL (down 2.80%) and State Bank of India (down 2.44%).

Sterlite Ind (up 3.78%); Tata Power (up 2.15%); Coal India (up 1.46%); Power Grid Corporation (up 1.38%) and Jindal Steel (up 1.20%) were the toppers on the Nifty today. The laggards were led by IDFC (down 4.48%); DLF (down 3.66%); Reliance Infrastructure (down 3.63%); HDFC (down 3.62%) and Kotak Mahindra Bank (down 3.30%).

Markets in Asia closed mostly higher, riding on positive economic news. In the US, home sales in January climbed to a nine-month high and weekly jobless claims fell to a four-year low. This apart, the South Korean central bank stated that consumer confidence rose to a three-year high.

The Shanghai Composite gained 1.25%; the Hang Seng added 0.12%; the KLSE Composite rose 0.14%; the Nikkei 225 surged 0.54%; the Straits Times rose 0.33%; the Seoul Composite climbed 0.60% and the Taiwan Weighted settled 0.28% higher. Bucking the trend, the Jakarta Composite tanked 1.62%. At the time of writing, the key European indices were trading with modest gains and US stock futures were in the positive.

Back home, foreign institutional investors were net buyers of shares totalling Rs104.55 crore on Thursday. On the other hand, domestic institutional investors were net sellers of shares amounting Rs640.93 crore.

Pharma major Strides Arcolab today said it has received USFDA approval for its Brazilian plant that produces sterile dry powder anti-biotic injectables. The plant has already been approved by other international regulatory agencies like MHRA and ANVISA and with this approval the company is in a position to commercialise products worldwide in the second half of 2012. Strides closed 0.25% higher at Rs545.15 on the NSE.

Leading steel pipe manufacturer Welspun Corp plans to spend $100 million (Rs500 crore) and add 200 jobs at its 3,50,000-tonne Little Rock production unit in Arkansas state of the US.

Through this expansion, the company will expand its product line of steel pipes to include the production of 6-inch to 20-inch ERW steel pipes, it said. The ERW pipes are largely used by oil and gas companies. The stock tumbled 3.63% to close at Rs141.95 on the NSE.

Panacea Biotec has launched polio vaccine POLPROTEC in Nigeria to help combat the spread of the debilitating disease in the country, one of the last nations still to eradicate the virus. To make the vaccine easily available, Panacea is partnering Emzor Pharma, which has a strong footprint across Nigeria. Panacea settled 3.06% lower at Rs77.50 on the NSE.


DB Realty denies any suit being filed against them

New twist in ongoing tussle between two former partners

A day after UAE-based Etisalat announced that it planned to sue Indian realty major DB Realty for “fraud and misrepresentation”, the latter has issued a statement saying no suit has been filed against them.

A press release from DB Realty said, “DB Realty is in the business of real estate development and has no direct or indirect shareholding in Etisalat DB (EDB). No suit or claim has been filed against DB Realty since it was never party to any agreements or otherwise.” The press release also said that Etisalat’s exit will not affect the financials of DB Realty.

The statement comes a day after Etisalat declared it was going to sue DB Realty for fraud and misrepresentation, and has started legal proceedings in the Bombay High Court against Shahid Balwa, chairman of Etisalat DB (EDB); vice chairman Vinod Goenka and Majestic Infracon Pvt Ltd, a DB group company.

Etisalat said that it was “induced into its investment in the company that was then Swan, without any disclosure of the matters that are now alleged by the CBI (Central Bureau of Investigation) and Supreme Court to have occurred in connection with the obtaining of second generation (2G) licences by EDB”.

The overseas company said that the events occurred a year before it had invested in the joint venture and admitted that it is facing major losses due to its investment “despite having no hand in 2G scam”. The Dubai-based telecom major’s statement was followed by a joint declaration by Mr Balwa and Mr Goenka, who claimed that they had filed a suit against Etisalat for mismanagement with the Company law Board (CLB), but withdrew it because Etisalat promised to perform better. The promoters of DB Realty said that Etisalat did not keep its promise, and said that the JV company was facing FEMA investigations due to Etisalat’s investments; and added that “Etisalat will be held responsible for their wrongful acts”.


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