IRDA/Cir/004/2003
Dated:14.02.2003
To
All the CEOs of Insurance Companies
Sub: Referral Arrangement with
Banks - Life Insurance
In super cession and substitution
of the circular, in regard to the subject under reference, issued vide,
IRDA/Cir/003/2003, dated 30th January, 2003, the Authority hereby issues
the following guidelines for life insurers for due compliance, whereas
revised circular for general insurers shall follow later after consideration
of their comments.
All insurers entering into agreements/arrangements
with Banks for referral business or renewing such agreements/arrangements
are advised to strictly take note of and adhere to the following:
I. No insurer shall enter into
a referral arrangement with any bank, which has been licensed by the
Authority to act as an agent or an insurance intermediary.
II. Referral arrangement may be entered into with a bank for access
to its data base, provision of physical infrastructure and for display
of publicity material of the insurer.
III. The participation by the bank's customers shall be purely on a
voluntary basis and this should appear prominently in all publicity
materials distributed by the bank and the insurer. It shall also be
mentioned clearly that the contract of insurance is between the insurer
and the insured and not between the bank and the insured. The referral
arrangement between the bank and the insurer shall not be construed
to have resulted into an agent-principal relationship between the bank
and the insurer.
IV. There shall be no linkage either direct or indirect between the
provision of banking services by the bank to its customers and use of
insurance products.
V. The bank which enters into any similar arrangements should not be
permitted to enter into any similar arrangements with more than one
life insurance company or more than one general insurance company. This
is important to ensure that a bank does not act defacto as an insurance
agent or as an insurance broker without any license.
VI. Referral fee paid by the insurer to the bank shall be treated as
acquisition costs and shall be decided between the parties under a written
agreement. The total payout under referral fee, by whatever name called,
shall include the element of management expenses as well and shall be
on the basis of business generated under such an arrangement and shall
not exceed the percentage of total premium as specified under:-
|
Business
generated through referral arrangement as a % of Gross Premium
Written
|
Maximum
Total payout as Referral Fee as a % of Total Premium
|
|
10%
|
5.50%
|
|
20%
|
11.00%
|
|
30%
|
16.50%
|
|
40%
|
22.00%
|
|
50%
|
27.50%
|
|
60%
|
33.00%
|
|
70%
|
38.50%
|
|
80%
|
44.00%
|
|
90%
|
49.50%
|
|
100%
|
55.00%
|
No commission or other remuneration
shall be paid along with referral fee.
A copy of the agreement entered into by the parties shall be filed by
the parties with the Authority.
VII. No insurer shall pay any
referral fee for any promotional campaign.
VIII. Every referral agreement shall be for a fixed period.
IX. Both the parties shall comply with the directions of the Authority
for acting under the referral arrangement, and that the Authority for
valid reasons and after hearing the parties, shall have the discretion
to apply its own criteria to reject or order for discontinuance of such
arrangements.
X. The insurer or the bank shall not construe that filing with the Authority
of such a referral arrangement, as due compliance of all other statutory
provisions under any other law or due compliance of the requirements
of other statutory authorities.
Yours faithfully,
(N. Rangachary)
CHAIRMAN