1. Insurance Regulatory & Development Authority has recently issued guidelines regarding Distance Marketing of Insurance Products, which will come into effect from October 1, 2011 (the “Guidelines”). Distance Marketing includes every activity of solicitation (including lead generation) and sale of insurance products through any of the following modes:
i. Voice mode, includes telephone calling
ii. Short Messaging service (SMS)
iii. Electronic Mode includes Email, internet and interactive television.
iv. Physical mode includes direct postal mail, newspaper & magazine inserts.
v. Solicitation through any means of communication other than in person.
2. The guideline which has been issued is made specifically applicable to activities of soliciting insurance products which includes Lead Generation amongst others. Lead generation as defined under Regulation 2 (xi) of the guidelines states the following:
“(xi) For the purpose of these guidelines, lead generation is the process of collecting the details of the clients or prospects in any fashion or approaching the clients directly or in distant mode to ascertain their intent to purchase insurance before proceeding with solicitation of insurance products and includes all the activities leading to the solicitation.”
3. As per your query, if you wish to pursue only ‘lead generation’, specific process under Regulation 9 lays down the compliances which are to be followed. The solicitation of insurance as well as lead generation shall be in specific compliance with the following process:
(a) Standardized Script:
The Insurers or the Brokers have to prepare standardized scripts for presentation of benefits, features & disclosures to the prospective customers. Solicitation through lead generation has to be according to the script. Further the script has to incorporate all the key features of the product which is intended to be sold & has to be approved by the compliance officer of the respective insurer. The scripts have to be filed with the authority (“IRDA”) under “Use & File” procedure within 15 days of their approval by the compliance officer. (Regulation 9.1 of the guidelines)
When the communication begins, the tele caller who is engaged for the soliciting business over the distant mode will highlight the name of the insurer. The purpose of the approach has to be clearly highlighted. (Regulation 9.2)
(c) Consent of the client:
The tele caller and the authorized verifier will ascertain if the client is interested in continuing with the subject by giving explicit consent. Only then they will proceed further.
The client will be given an option to exit at every stage in case of electronic modes. The hours during the day when the tele called can call the client will be given by the Telecom Regulatory Authority of India or Department of Telecom (TRAI/DOT) orders. In case of telephonic solicitation the name of the caller has to be disclosed and language option has to be given.
Tele callers have to inform the clients that the call is being recorded & that the client is entitled to a voice copy, if he so desires, at any time during the term of policy or until a satisfactory settlement of claim, whichever is later.
No inconvenience, nuisance or harm has to be caused to the clients in the course of solicitation. Full disclosures have to be made under all modes of distance marketing and requirements of confidentiality, privacy & non- disclosure has to be made. (Regulation 9.3)
(d) Client Information:
All relevant information which relates to the client as well as the person/asset to be insured has to obtained & solicited on the basis of analysis of the clients needs as specified by the Authority from time to time. (Regulation 9.4)
(e) Product benefits & features:
The standardized script will cover the following items in course of presentation:
(i) The specific responses of the client in the form of agree/disagree, yes/no, accept/reject, understand/don’t understand, as applicable, against each of the items mentioned below under all modes of solicitation.
(ii) Name of the product suggested and its nature and parameters.
(iii) Insurance cover available under the product for a specified amount of annual premium, or, conversely, premium chargeable towards a specified amount of insurance cover.
(iv) The scope of cover, perils covered and not covered, exclusions, deductibles or franchise, co-payments, loading/discounts on premiums, add-on covers, conditions, other terms and benefits, mid-term inclusions, short period scales, basis of sum insured, warranties, clauses and endorsements, compliance with Section 64VB of the Insurance Act, 1938 – payment of premium before commencement of risk, etc, as applicable.
(v) The contents of the “key features document” as and when specified by the Authority.
(vi) The right to cancel the policy within 30 days of receipt of the policy in case of disagreement with the terms of the policy under all life contracts and covers tied to credit/debit/other cards, and for all personal accident and health insurance policy contracts with a term of 3 years or more offered by insurers over distance mode, provided no claim has already been made on the policy.
(vii) Disclosure of rates of commission available on the product solicited upon the request of the client.
(f) Premium Ceilings in case of sale of ULIP’s and prohibition of sale of Universal Life Products over telephonic mode.
Exceptions are carved out when it comes to selling insurance products over the phone as well as SMS.
(i) Insurers will not solicit United Link Insurance Plan (ULIP) of non-single premium type for annualized premiums exceeding Rupees 50,000 over the telephonic mode.
(ii) Single premium ULIP’s will not be solicited for a premium of more than Rupees 1,00,000 over telephonic mode.
(iii) No variable insurance product will be solicited or sold over distance marketing mode.
4. Payment of fee towards services provided by the lead generation set up & infrastructure set up cost of the outsourced telecaller under the guidelines. (Regulation 9.6)
As per the guidelines, we understand that, Insurers/brokers may engage following persons for the purposes of solicitation;
(i) Employees on their rolls (in case of brokers only those employees who have undergone statutory training);
(ii) Specified persons of corporate agents or
(iv) Insurers or brokers.
(Regulation 4 of the guidelines)
Further, under Regulation 7 of the guidelines for promotion of products by brokers, it has been clarified that “Insurers shall not pay the brokers any remuneration other than brokerage. Also no payments by any name shall be made by insurers to brokers or their related parties towards infrastructure or any account other than brokerage on the policies solicited or procured over distance mode.”
Therefore, a clear picture regarding brokers soliciting insurance products is provided for in the guidelines.
In case, a broker is not appointed for soliciting business, according to Regulation 4 (supra) corporate agents may appoint specified persons for the same, for the same we refer to the Insurance Regulatory & Development Authority (Licensing of Corporate Agents) Regulations, 2002 which defines Corporate Agent as a “Person- which means-
(i) a Firm or
(ii) a Company formed under Companies Act 1956
(iii) a banking Company
(iv) a corresponding new bank as defined under Section 5 (1) (da) of the Banking Companies Act, 1949.
(v) a Regional Rural Bank
(vi) a Cooperative Society including a Co-operative bank
(vii) a Panchayat or local authority
(viii) a NGO or a micro lending finance organization
(ix) any other institution or organisation which on an application to the Authority is specifically approved by the Authority.
Specified Persons is also defined which means a director or a partner or one or more of its officers or other employees so designated by the corporate agent and, in the case of any other person, the chief executive, by whatever name called, or one or more of the employees designated by him, who has undergone the practical training, examination, certification and who is responsible for soliciting and procuring insurance business on behalf of the Corporate Agent.
5. Regarding, the synthesis with IRDA (Sharing of Database for Distribution of Insurance Products) Regulations, 2010, a referral arrangement is entered into with the insurer which means an arrangement between a referral company and an insurer in terms of an agreement entered into for the purpose of sharing of the database of the customers of the referral company but does not include the soliciting or sale, directly or through an agent, corporate agent or an insurance intermediary including micro insurance agent of an insurance product.
Thus the intent of both the act seems to be different since this referral company should not have any linkage, direct or indirect with the transaction or distribution of the business of Insurance.