Corporate insurance agents: SECP unveils new regulatory framework

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has barred the corporate insurance agents from charging any service fee, processing fee or administration charge unless such fee/charge has been included by the insurance company in the premium and communicated to the policyholder.

The SECP Friday issued a new regulatory framework for corporate insurance agents of insurance companies through issuance of the Corporate Insurance Agents Regulations, 2020.

The regulations aimed at curtailing the issue of mis-selling and ensure provision of maximum and clear information regarding company's term and conditions of an insurance policy.

The regulations also include measures to promote technology-driven modes of corporate insurance agents. To protect policy holders' rights, the regulations require corporate insurance agents including banks to ensure provision of clear and detailed disclosures to potential policyholders/customers.

The after-sales callback confirmation process has been improved and a basic script of callback confirmation has been included in regulations. The regulations also introduced an automatic commission claw-back provision.

Product structure and bank's remuneration have been further aligned to the policyholder's interest through rationalisation of commission rates and introduction of minimum premium allocation rates.

Other areas addressed in the regulations include, promotion of digitalisation, encouraging suitable product mix, provision of bilingual policy documents to policyholders, increased communication with the policyholders through SMS and emails, enhanced disclosure requirements including showing audio-visual clip of insurance product to policyholders, and enhanced training requirements etc.

Under the new regulations, the level of commission payable to the corporate insurance agent for its role of soliciting and procuring insurance business may vary based on any performance criteria, which the insurer and corporate insurance agent may agree and the rates and structure of the commission shall be clearly mentioned in the agency agreement. Any commission to be paid by the insurer to the corporate insurance agent must be computed on premiums received by the insurer and under no circumstances the commission on premiums to be received in future.

The corporate insurance agent shall not charge, to the policyholder, any service fee, processing fee, administration charge or any other charge unless such a charge has been included by the insurer in the premium and communicated to the policyholder in advance, the SECP added.

The new regulations shall be applicable on all new insurance business written on or after July 1, 2021 by insurers under their agency agreements with corporate insurance agents. The insurer and the corporate insurance agent shall make amendments in the existing agency agreements, wherever necessary, to comply with these regulations no later than June 30, 2021.

The sale of all insurance products by any corporate insurance agent (on behalf of an insurer) must be done in such a manner which demonstrates that the prospective purchaser makes an offer to enter into the insurance contract, and either the corporate insurance agent on behalf of the insurer signifies acceptance or the insurer directly signifies acceptance, the SECP said.

The arrangement between insurer and corporate insurance agent revealed that any arrangement between insurer and the corporate insurance agent shall not be valid, unless it incorporates the laid down components in the agency agreement.

The insurer may assign the responsibility of collecting premiums due on policies once issued, to the corporate insurance agent but before it does this, the insurer shall ensure that the corporate insurance agent has in place the necessary premium collection system.

Under the arrangement with the corporate insurance agent, the claim adjudication and settlement shall be the responsibility of the insurer, and the corporate insurance agent shall play a facilitating role by assisting the policyholder or nominee(s), as the case may be, in claim processing. The contact details of the insurer for claim settlement shall be prominently displayed on the insurance contract.

Copyright Business Recorder, 2020