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(Image: visual representation of IRDA’s Insurance Web Aggregator regulations)

Two and a half years after it came up with incredibly myopic and disastrous Web Aggregator guidelines, India’s insurance regulator IRDA doesn’t appear to have learned much. In a set of regressive draft guidelines issued earlier this month (download), the IRDA is defining terms of contracts between Web Insurance Aggregators, which should only be viewed as marketing and comparison firms, defining the content that should be made available on their websites, disallowing advertising on these sites, and even determining the terms as per which leads should be transferred between a web insurance aggregator and an insurance company.

What’s remarkable is that the guidelines initially hint towards a change in approach: that they’re switching from a licensing model to a registration model for web insurance aggregators.

“On receipt of the fee and on satisfactory compliance of terms and conditions for grant of registration, the Authority shall grant the certificate of registration to act as an Insurance Web-Aggregator for which an application is made.”

However, what’s the point of switching to registration, when the terms applicable will be just as limiting and onerous as a license, and as full of red-tapism as earlier? In the last set of guidelines, the license was for three years. Now the registration is valid for three years.

The IRDA has to be the most regressive regulator in India, having converted what was merely an online comparison and marketing business into heavily regulated and burdened business. Some of the things to note from the draft guidelines, which are similar to the one 2 years ago, apart from ownership structure:

1. The IRDA will only allow a certain type of person to lead a Web Aggregator business: The Principle Officer (for example, the CEO) has to be someone who has been carrying out reinsurance related activity or insurance consultancy for a continuous period of seven years, or for not less than seven years, has been a principal underwriter or a manager in a nationalized insurance company in India, or is an associate or fellow of some of the institutes specified by the IRDA.

2. The IRDA doesn’t want you to sell much stake to Indian Investors: Foreign investors can own up to 49% of the paid-up equity capital of Insurance Web-Aggregator at any time. However, Indian investors together, can only own 25%, and no Indian investor can own more than 15% of the paid-up equity capital.

3. Founders and investors can’t have had an exit in the last two years: “The foreign promoter or foreign investor or Indian Promoter of the existed venture have exited for any reason at any time during the preceding two financial years from the date of application.”

4. The IRDA is limiting your business model:

  • No referral arrangement: The Web Aggregator “shall not have a referral arrangement with an Insurer.”
  • No payment for transmission of leads generated: “No charges shall be paid for transmission of leads by the Insurance Web-Aggregator to the Insurer.”
  • Payments only for conversion sales: “Leads which are converted into sale of insurance policies will entitle the Insurance Web-Aggregator to earn remuneration as applicable to insurance intermediaries.
  • No payments for signing up an insurance co: “No insurer shall pay and no Insurance Web-Aggregator shall receive any signing fee or any other charges by whatever name called, except those permitted by the Authority under relevant regulations, for becoming its Insurance Web-Aggregator”.
  • Only a display fee of Rs 50,000 per insurance product for displaying the product on the website.
  • Your deal with the insurance company can only be three years: “The agreement between an insurer and Insurance Web-Aggregator shall be valid for a period of three years from its date, subject to the validity of registration of Insurance Web-Aggregator.”
  • Can’t market other products: A web insurance aggregator cannot display other products or services (financial, FMCG or anything else) on their website.
  • Can’t sell lead to more than three insurers, even with user permission: “Insurance Web-Aggregator should provide an option to select up to three insurers by the visitor, to whom the lead can shall be transmitted simultaneously.”
  • No display advertising
  • Can’t operate multiple websites: “or tie up with other approved / unapproved /un-registered entities / websites for lead generation / comparison of product. Only exceptions available to them are if they use the domain names with .com, .in or .co.in “for the primary website of the Insurance Web-Aggregator…”. Even then, the Insurance web aggregator has to inform the IRDA in writing of each new website and the date of launching such websites or mobile sites, “within 15 days from the date of Domain Name Registration and Date of launching respectively in case of any change in the name(s) of the existing websites or new websites.”
  • Can’t operate the websites of other Financial / Commercial / marketing or sales or service entities
  • Use other Social Media sites for comparison of products.

5. The IRDA needs to approve your hosting provider and other vendors: including for the Lead Management System, Webhosting, Other core activities. It also needs to approve the “Change of location of the Servers hosting the comparison website(s)”

6. The IRDA is still determining your name: All insurance web aggregators need to have the phrase “Insurance Web-Aggregator” in their name. They also need to “take the prior approval of the Authority for change of its name.” Oh, and “Insurance Web-Aggregators are not permitted to use any other name in their correspondence/ literature/ letter heads without the prior approval of the Authority.”

7. The IRDA wants to determine how your lead generation works:

  • How soon the leads have to be sent: You have to send the lead to the insurer “Not later than three days of (the users) visit to the web site.
  • They’re determining display of product comparison:
    • No ratings, ranking, endorsements, information about bestsellers
    • No commenting on insurers or their products in their editorials or at any other location in their websites.
    • Specific products under a specific criteria can only be compared, and basic features of the product may be compared, such as eligibility criteria, premium term, riders, benefits, etc.
  • Categorization of products: They’re determining how products will be categorized. For example, for Life Insurance, as “Whole Life Policies”, “Term Insurance Products”, “Endowment Products”, “Children’s products” etc.
  • How the comparison chart works: “The comparison chart displayed on the Insurance Web-Aggregator designated web-site shall take the customer through the web-pages which will be acknowledged by him in the following order:
    1. coverages
    2. exclusions
    3. benefits
    4. terms,
    5. conditions and
    6. price

One would have thought that, with time, and with lack of investment and competition in what is an insurance marketing and lead generation activity, the IRDA would have opened up, like the RBI eventually did with mobile payments. It seems that they haven’t changed.

History

– Jan 2014: Why you shouldn’t start a Web Insurance Aggregator in India (Guidelines)
– Aug 2013:
 On The Regressive Web Insurance Aggregator Regulations Proposed By IRDA (Draft guidelines)
– Nov 2011: IRDA Regulates Web Based Insurance Aggregators; Fixes Max Rs 10 Per Lead, 25% Commission (Guidelines)
– Apr 2011: IRDA Draft Guidelines Will Limit Indian Web Insurance Aggregators (Draft guidelines)