Stop Insurance Co rebating of premium by Direct Marketing, IRDAI keep competition Fair.

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The Problem

In the past couple of years, a few insurance companies have aggressively started direct marketing or B2C initiatives by tapping into the existing large client databases. The Direct Marketing team of such companies are offering the same products generally marketed by insurance agents, advisors, corporate agents/banks, brokers, insurance marketing firms and other Intermediaries ("Agents"), but at “discounted or rebated premiums".

This practice is affecting the livelihood and competitiveness of agents, corporate agents/banks, brokers and other intermediaries, since obviously clients are lured to purchase a policy at “rebated premiums". Why should the Agents be subject to this unfair business practice ?

 Agents are required to have a minimum qualification to undergo mandatory training, pass an exam and then get licensed by IRDA, only after which they are permitted to acquire new clients and solicit business for the insurance company. Agents are trained to analyse the client’s existing insurance, suggest additions or changes, explain the features of various policies and customise insurance solutions to suit clients needs. They also provide administrative services, such as keeping records, assisting in policy renewals and help policy holders in settlement of claims. For the above, the Agent earns a commission from the company. Are the Direct Marketing employees trained and licensed by IRDA to provide the above services which an Agent is trained and licensed to provide ? if not, then an Agent is put in a disadvantageous position if a policy is purchased from the direct marketing employee vis-a-vis an Agent due to the above and the predatory pricing that is currently prevalent. 

Section 41(1) of Insurance Act 1938 states that “No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the Policy, nor shall any person taking out or renewing or continuing a Policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectus or tables of the insurer: Provided that acceptance by an insurance agent of commission in connection with a Policy of life insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this sub-section if at the time of such acceptance the insurance agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurer. "The Insurance Act, 1938 does not permit the offering of any rebate on the commission payable or any rebate of the premium shown on the policy.  

41 (2) Any person making default in complying with the provisions of this section shall be liable for a penalty which may extend to ten lakh rupees."

The insurance company's direct marketing initiative of offering policies at a discounted premium is nothing but a "rebate of premium" in disguise. It may be argued that the company may have sought approval from IRDA to offer discounted premiums for direct clients but this would defeat the very objective and intent of Section 41 which essentially does not permit rebating of premium. 

Further, an Agent and a direct market employee have a similar relationship as such with an insurance company, although the manner of compensation differs. The difference, as I understand, is that the direct marketing employee gets a fixed salary plus incentives, while an Agent does not get the benefits of a fixed salary and is purely dependent on variable commission and incentives. 

I strongly believe that this is an unfair business practice, which is leading to unhealthy competition and may adversely impact the insurance industry in the near future. IRDA needs to urgently address this issue of “rebating of premium”, which if continued to be permitted, would affect the livelihood and competitiveness of more than 2.2 million Agents, Corporate agents/Bank, brokers and other intermediaries, who have been the back bone in the past and will be  instrumental to the growth of the Insurance Industry in future.

Way Forward :- IRDAI must regulate the published prospectuses or tables  rates of the insurer at fixed rates for direct marketing teams, Agents and all intermediaries. The clients are free to choose direct marketing or Agents based on their quality of advice and services. We are very much for competition but it must be fair and on a level playing field.

We must collectively urge IRDAI to stop insurance companies from rebating of premiums and predatory pricing strategy, so that Agents and all intermediaries can focus on increasing the insurance penetration in India rather than fight a failing battle with an Insurance company's direct marketing team based on price. 

I have decided to protest against the "rebating of premium" and predatory pricing strategy adopted by Insurance companies by wearing a Black Tie to work everyday, I request you to do the same or at least wear a Black Ribbon or arm band everyday or at official meetings and functions as sign of peaceful protest against this unfair and unethical business practice. 

Objective: The objective is to stop the unfair competition, predatory pricing strategy and prevent mass unemployment amongst 2.2 million + Agents. This petition is not intended to be against any particular insurance company but is only against the unethical and unfair insurance industry business practice of “Rebating of Premium”. If you have any queries or would like to discuss this issue, please feel free to call/whatsapp me on 9892219020 or email prakashsmahtani@gmail.com. I will be happy to hear from you. 

I request you to Sign this petition and forward to others on Whatsapp groups and like, comment or share on Facebook, so that we can together mobilise a large number of Agents and garner strong support to stop “rebating of premium” by Insurance companies with the help of IRDAI.

I sincerely thank you for your kind attention and support.

Prakash Mahtani

Disclaimer : The views and opinions expressed in this petition are solely those of the author and do not reflect the views, official position or policy of any company or agency in any manner whatsoever. 



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