The Insurance Regulatory and Development Authority of India’s recent draft regulation on e-commerce in insurance appears to be yet another desperate move to increase the number of e-accounts. The new guidelines allow any entity to sell insurance policies online after registering with IRDAI. Given the rampant mis-selling in the insurance industry, a move to open up e-commerce in insurance without proper checks and balances is likely to create more trouble.

The draft regulation has not spelt out in detail the checks that will be placed on these web aggregators. Since the draft rules allow insurance companies to compensate the platform providers for sale of policies, there are chances that these platforms will be inclined towards promoting the products that pay the highest incentive. If SEBI wants to allow mutual funds to be sold via the e-commerce channel, it is to bring down costs further for investors. But, in insurance, given that the e-commerce platform will be run by agents, there is no way the premium is going to come down. Insurance can’t be sold like a mobile phone in an online market. Even today, the basics of a life insurance policy are not clear to many. And unlike consumer goods, there is no ‘return policy’.

If the objective is to increase insurance penetration, mass awareness campaigns and driving the industry to issue simple, pure risk covers, will be of greater help. The Centre’s Pradhan Mantri Jeevan Jyoti Bima Yojana is a success for two reasons — the affordable premium (₹330 a year for ₹2 lakh irrespective of age, fixed for two years) and the hassle-free buying process. The regulator must encourage such schemes. However, one welcome aspect of the draft regulation is that it makes disclosures about limitations of all products mandatory for online sellers of insurance.

Rajalakshmi Nirmal Chief Research Analyst

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