Coming down heavily on two largest insurance brokers, Maruti lnsurance Brokers Pvt Ltd (MIBL) and Hero Insurance Brokers Pvt Ltd (HIBIL), the insurance regulator has exposed violations of several of its guidelines on Motor Insurance Service Provider (MISP) by these brokers. The Insurance Regulatory and Development Authority of India (IRDAI), while directing Maruti lnsurance Brokers and Hero lnsurance Brokers to dismantle their panel of insurers, and not to interfere in premiums, also levied penalty on the brokers.
IRDAI had received complaints from some general lnsurance agents association about apparent conflict of interest in the role of MISP in selling insurance policies and servicing and repairing of motor vehicles under the insurance policies sold by it, high claims ratio under the MISP channel, extra payments made to MISP by insurers, and disparity of treatment to agents.
Maruti lnsurance Brokers and Hero lnsurance Brokers are two of the largest motor insurance brokers for four wheelers and two wheelers, respectively, in India. Both these brokers are associated with Maruti Suzuki India Ltd and Hero Motocorp Ltd (formerly Hero Honda).
In two separate orders issued on 17th and 18 December 2019, IRDAI has also asked both these brokers not to pay any performance incentives to their principal officers for submitting affidavits contrary to facts of the cases. While Maruti Insurance Broking is directed to pay Rs3 crore, Hero Insurance Brokers is asked to pay Rs2.18 crore as penalty for violations of various guidelines of MISP.
"By not explaining to the customer the degree of choice that products are on offer, providing the customer a comparison in terms of price, cover or service, MIBL and HIBIL has violated the conduct in matters relating to clients relationship under Schedule I - Form H dealing with Code of Conduct under Regulation 30 & Regulation 8(2) of IRDAI (lnsurance Broker) Regulations, 2018 and by not getting the best terms, benefits, coverages for the customer MIBL and HIBIL has not conducted its dealing with its clients with utmost good faith and integrity, nor has it acted with care and diligence thereby violating the conduct in matters relating to clients relationship under Schedule I - Form H dealing with Code of Conduct under Regulation," the orders say.
Before IRDAI, MIBL admitted that MISP sponsored by the broker have offered discount on labour and interior cleaning, thereby inducing the customer and indulging in unfair business practice, which the regulator says restricts the choice of the policyholder to choose the insurer or insurance intermediary. IRDAI observed "By denying the facility of cashless claims to the policyholder, when the motor insurance policy is not purchased through MISP's sponsored by MIBL, the MISP is discriminating between policyholders. MISP's have therefore violated Guidelines 12 & 13 of the MISP guidelines dated 31 August 2017."
"By admitting to Maruti insurance retention, under customer retention programme as one of the performance parameters to judge the performance of the dealer and reward him accordingly, the principal officer has contradicted his assertion in the affidavit and also violated IRDA Circular no. lRDA/ INT/ MISP/ 5/01/2018 dated 11th January 2018, which states that no MISP or the insurance intermediary can enter into an agreement with the original equipment manufacturer (OEM), which has an influence or bearing on the sale of motor insurance policy," the order says.
Similarly, HIBIL being a representative of the customer, has a responsibility to ensure that the policyholder or customer gets the best terms, benefits, coverages and render proper advice on appropriate insurance cover and terms. IRDAI says, "By having a uniform rate across four insurers, HIBIL has not performed the functions of the direct broker and violated Regulation 4 of IRDAI (lnsurance Broker) Regulations 2018."
Based on submission of HIBIL, the insurance regulator pointed out that the brokerage was inducing customers and indulging in unfair business practice. Out of 3.52 lakh two-wheelers sold, 1.29 lakh customers or 37% bought insurance policies from HIBIL, which IRDAI says is a "very significant number and cannot be ignored".
HIBIL denying uniform rates to customers directly contradicts the earlier submission which shows one premium rate by one insurer for four wheelers, three wheelers and miscellaneous (such as tractors, excavator, and harvester or Misc-D) vehicle. Also it shows for two wheelers, only three insurers for 100 cubic centimetres cc, two insurers for 110 cc, and one insurer for 125 cc, which again is a violation of the MISP Guidelines.
"The admission by HIBIL that cost of own-damage (OD) premium was reimbursed to customer proves that HIBIL was indulging in unfair trade practices, indulging in manipulating insurance business and restricting the choice of the customer," IRDAI added.
Several customers and customers of other insurance brokers have filed complaints before IRDAI about violations of MISP guidelines by Maruti lnsurance Brokers and Hero lnsurance Brokers. Customers of Policybazaar lnsurance Web Aggregator Pvt Ltd had said that customers who are purchasing insurance policies through the web-aggregator's web-site are being denied the facility of cashless claims if the motor insurance policy has not been purchased through MIBL or through MISP's sponsored by MIBL.
IRDAI had received several complaints and representations from some general insurers stating that they are willing to enter into a service level agreement with MIBL based on transparent and objective criteria. However, despite the insurance companies having made many requests to MIBL for empanelling them, MIBL have neither responded nor empanelled them for selling motor insurance policies through their MISPs, the regulator observed. MIBL admitted to creating a panel of 13 general insurers out of a total of 25 general insurers.
HIBIL or Hero Insurance Brokers, on the other hand admitted that it was working with only four insurers out of 25, from 1 September 2018, or after the start of its business operations. IRDAI, however, observed that even in that case, HIBIL has denied uniform rates to customers. “This directly contradicts (HIBIL’s) the earlier submission, which shows one premium rate by one insurer for four wheelers, three wheelers and Misc-D vehicle. Also it shows for two wheelers only three insurers for 100 cc, two insurers for 110 cc, and one insurer for 125 cc, which again is a violation of the MISP guidelines.”
Both Maruti lnsurance Brokers and Hero lnsurance Brokers are directed by IRDAI to...
a) dismantle panel of insurers and empanel all insurers on platform, have full integration with insurers computer systems, ensure premiums quoted to customers come directly from insurer's systems without any intervention by the broker and report compliance within three months from the date of the order. ln case any insurer does not wish to enter into an agreement with the insurance broker for selling and distributing motor insurance policies through the MISPs sponsored by MIBL/ HlBlL, the chief executive (CEO) of the general insurance company shall confirm the same in writing to the broker.
b) redesign the current system of seeking customer consent for purchasing the motor insurance policy in such a manner that the customer exercises choice of selecting the insurer through an OTP based system at the time of issuance of a new motor insurance policy and its renewal. The broker company shall complete the task in six months and report compliance.
c) submit a quarterly audit report from DISA/ CISA certified auditor that the electronic platform or portal complies with the requirements of the MISP guidelines and in no way interferes or places restrictions in the premium to be charged by insurers or in any way restricts or influences the choice of the customer.
Here are the orders issued by IRDAI against Maruti Insurance Brokers and Hero Insurance Brokers…
And Policybazar playing victim card? Ha Ha. They are know to push products of certain insurers (no prize for guessing why) when one tries to buy policy on their portal.
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