General insurers want lower penalty for mis-selling

General insurers want lower penalty for mis-selling

General insurers want lower penalty for mis-selling

General insurers have pitched for relief from the hefty penalty for mis-selling proposed in the draft Insurance Amendment Bill.

They have submitted a representation in this regard before a Parliamentary Select Committee through the General Insurance Council (GIC).

A number of GIC members, who also head the general insurance firms, recently called on the committee members in New Delhi to express their opinion on the Bill that seeks to hike FDI in insurance to 49 per cent from 26 per cent.

"The Council has demanded a relief from high penalty they are supposed to pay in case of mis-selling any products to customers by their agents," a state-run general insurance company's chief told PTI.

The Bill has incorporated stringent conditions, including hefty fine, against the general insurers in case products are mis-sold by their agents to customers.

However, the general insurers have argued that such stringent conditions would adversely affect their marketing activities and also growth of the key industry.

"There should be fines but they shouldn't be that prohibitive to suffocate growth.
Certain penalties have been recommended in the Bill which we are opposing and we have already given our representation on the issue before the select committee through the Council," another state-owned general insurer said.

The companies have also suggested to revive the commission on obligatory reinsurance business with the country's official reinsurer GIC Re.

There is a provision in the Bill for withdrawing existing commission, currently pegged at 5 per cent, when the general insurers reinsure the mandatory portion with GIC Re. The existing regulations provide that 5 per cent of general insurance business has to be reinsured with GIC Re.

Normally, when a general insurer does business with a reinsurer the latter pays a commission to the former to compensate the expenses spent on procuring the business.