India's Irdai Pitches Public Register for Insurance Seller Accountability
India's insurance regulator, Irdai, proposes a public register to identify individual policy sellers, aiming for greater accountability in mis-selling. However, an analyst suggests this approach overlooks systemic incentive issues.
Irdai's Accountability Drive
India's insurance regulator, Irdai, recently proposed a public register for individual insurance policy sellers. Irdai Chairman Ajay Seth introduced the concept at an insurance brokers' association gathering in Delhi last week. The register aims to trace each policy to its specific seller, moving beyond merely identifying the bank or broking firm involved.
This initiative seeks to enhance accountability, particularly in cases of mis-selling, such as an expensive endowment plan sold when a simpler term cover would suffice. The regulator intends for a seller's record to follow them across different employers.
Analyst Questions Underlying Incentives
Dhirendra Kumar, founder and CEO of Value Research, offers a critical perspective on the proposal. He argues that while a register identifies *who* mis-sold a policy, it does not address *why* they did so. Kumar suggests that frontline sellers often execute incentives designed at higher corporate levels.
He likens this to carmakers removing spare wheels to protect margins; the blame lies with those setting targets, not just those meeting them. A register, in his view, captures the "executor" but ignores the "author of the incentive."
Systemic Sales Issues Persist
Kumar contends that a seller's history following them may not be as impactful as it seems. He argues that new hires within the same incentive structure will likely behave identically, as the system, not the individual, drives the behaviour. Current data supports this view: over one in five complaints against life insurers relate directly to how a policy was sold.
This shows a systemic issue, suggesting the sales "machine" operates as designed, rather than isolated incidents of "bad apples."
For India's insurance sector, this debate highlights a persistent challenge. While the register could offer some transparency, its effectiveness in curbing mis-selling depends on addressing the underlying commission structures. Kumar suggests a more effective regulatory approach would make unsuitable sales unprofitable first, then use a register to confirm a shrinking problem.
Until then, buyers' caution remains their primary protection. The industry faces pressure to re-evaluate sales incentives, potentially impacting distribution models and agent remuneration.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
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