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Insurance regulator orders halt to insurance hawking through mobile service providers
After years of overlooking irregularities, the Insurance Regulatory Commission of Sri Lanka (IRCSL) has ordered insurance companies to stop using mobile service providers to hawk their policies and to accept liability themselves.
The directions issued on Monday are aimed at ensuring that mobile phone subscribers are well-informed of the policies being sold to them and have a clear understanding of benefits and exclusions. This is in sharp contrast to how per-day insurance was being sold by leading mobile phone operators to their network users till now.
While insurance selling requires trained agents to explain policies in some detail to potential customers, mobile-enabled insurance was carried out in Sri Lanka through short telephone calls (usually under five minutes) during which the prospect was made to sound as attractive as possible.
There was typically no contract for a customer to examine and no clarification about exclusions. And there was no independent research on how many customers gave up, forgot, did not realise or understand what a policy entailed.
But in directions published on its website, the IRCSL now mandates that the present method of using the platform of telecommunication service providers’ services–such as mobile and fixed lines–by insurers for selling insurance products to potential policyholders and general public “shall be stopped forthwith”.
Instead, insurance companies shall obtain the databases of telecommunication service providers and sell their products directly to the potential policyholders, general public and customers “through the insurers’ own marketing techniques and strategies”.
The officers and or staff employed in offering insurance products to potential policyholders and general public “shall be the trained officers and staff of the respective insurance companies or insurance agents or insurance brokers”.
“The liability for continuation of servicing the insurance policies which have been sold through using the telecommunication service providers’ platforms shall be borne by the respective insurance companies by providing the required customer services directly or through insurance agents,” the IRCSL holds.
Action will be taken against any insurers who violate these directions on complaints received after December 1 this year. With the new directions, the liability for what happens to insurance policies when mobile SIMs change hands–as the billing was previously done through phone connections–falls on insurers.
With mobile phone penetration at around 130 percent, this was a captive market from which insurance companies benefited. But owing to concerns about the unchecked nature of the business, the IRCSL appointed a Subcommittee on Mobile Insurance. It is based on the recommendations of this group that action has finally been taken.
In March this year, the Sunday Times published the results of an investigation which showed that mobile-enabled insurance in Sri Lanka was completely unregulated.
We also filed a request under the Right to Information Act. In it, we asked if the IRCSL knew the profile of customers (including location, professions and level of education about insurance) to whom policies were sold via telecommunication platforms; what language the selling took place in; and whether customers approached through mobile phones were of mental capacity to understand the legal contract being sold to them.
We asked the IRCSL for a breakdown of respective policies (health, accident and life) sold; whether the IRCSL knew if exclusions were explained; how long the phone conversations usually lasted; whether the IRCSL as regulator authorised the selling of an insurance contract over the phone and what the legal provisions were governing the same.
We questioned whether insurers reported separately to the IRCSL on mobile-enabled insurance–including earnings and claim rates–and whether this was done annually, bi-annually, quarterly or never. Among other things, we also asked what commissions insurers paid to mobile service providers and whether the IRCSL required that information from the companies.
We received neither an acknowledgement of the RTI request nor the information sought.