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Insurance and e-commerce - Web-Aggregation business in India

Source: Asia Insurance Review | Jan 2015

By Ms Leena Chacko, Partner, and Mr Arpan Chowdhury, Senior Associate, both from Amarchand & Mangaldas & Suresh A. Shroff and Co, Mumbai.

Consumers in India have typically accessed insurance products through agents and brokers. This limited the outreach of insurers. Recognising the void, web-aggregators came into the picture. These websites provided product comparison to consumers and generated leads for the insurers. These sites, inter alia, provided premium comparison for similar products across insurers and also provided ratings, rankings and best seller statistics. 
 
Web-aggregation of insurance products continued unregulated till early 2012, until IRDA, the Indian insurance regulator, issued guidelines for web-aggregators. The guidelines prescribed minimum eligibility criteria and circumscribed the scope of operations of web-aggregators.
 
The 2012 Guidelines and the first steps in regulation 
Under the guidelines, web-aggregators could only provide factual information to consumers on insurance products and not comment on any insurers or their products. The relationship between insurers and web-aggregator was also regulated to ensure that the aggregator remains neutral. 
 
These include disclosure of any agreements between the insurer and the aggregator to the IRDA, limiting the number of leads that the web-aggregator could provide for any consumer and also the remuneration payable by the insurer to the aggregator.
 
Pursuant to feedback from the industry, the guidelines were replaced by a new set of regulations on web-aggregators in January 2014. 
 
The 2014 regulations
The 2014 regulations did not make any significant changes to the regulatory framework as set out in the 2012 guidelines insofar as the same governed the content that web-aggregators could host. 
 
However, they are now allowed to provide information on service levels and claim experiences. However the fee for comparison charts has been halved, prohibiting insurers from paying for leads thereby limiting the revenue streams for the business.
 
The regulations allowed web-aggregators to engage in telemarketing and distance marketing for the purposes of solicitation of insurance business. This was, of course, subject to various strict parameters such as using trained personnel and following a specified process of solicitation set out in the regulations. Insurers can now also outsource limited premium collection and administrative policy services to web-aggregators. 
 
The regulations also state that the aggregate direct and indirect foreign equity holding in a web-aggregator should not exceed 26% of its paid-up equity capital. Companies whose shareholding is in breach of this limit have been provided one year to comply. Further, any transfer of substantial ownership would now require prior approval of the IRDA. 
 
It would seem that the regulations has formally come to recognise web-aggregators as an insurance 
intermediary. 
 
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