Summary: The Insurance Regulatory and Development Authority of India (IRDAI) is introducing “Bima Vistar” on January 1, 2024, a bundled insurance product designed to offer affordable life, health, casualty, and property coverage. To distribute this product, IRDAI has established the “Bima Vahak” channel, intended primarily for rural areas with a progressive engagement target in every Gram Panchayat by December 31, 2024. A Bima Vahak can be an individual or a legal entity engaging multiple individual Bima Vahaks. While the guidelines encourage a women-centric approach for Bima Vahaks, it’s not a mandatory requirement. These Vahaks will act on behalf of insurers, utilizing handheld electronic devices for soliciting business, issuing policies, collecting premiums, undertaking KYC processes, and assisting with claim settlements. The IRDAI emphasizes consumer protection, mandating insurers to designate Complaints Handling Officers and ensure Bima Vahaks issue identification cards and display essential contact details at retail outlets. Insurers remain responsible for the conduct of Bima Vahaks and must ensure compliance with KYC and AML regulations for policies sourced through this channel. This initiative aims to expand insurance penetration and simplify access, mirroring successful grassroots distribution models in the banking and pension sectors.
“BIMA VAHAK”- A WOMEN CENTRIC DISTRIBUTION APPROCH IN INSURANCE SECTOR
As you are aware insurance has become one of the most important necessity of our life. An insurance coverage provides us financial security at the time of damage, injury or disease. The cost-of-living day to day is increasing and same cost of hospitalisation. Without insurance you are at risk of financial distress at the time of hospitalisation.
The Insurance Regulator in consultation with Government of India has fixed a target to provide or to insure all citizen of Indian till 2047. To achieve this target the IRDAI has taken various steps to boost investment and ease of doing business in insurance sector. The Government has increased FDI from 40 to 74% and various Regulations, Rules have been amended or repealed. The IRDAI has also discontinued various returns to be filed by insurance companies on monthly basis.
PLEASE NOTE THAT: The Insurance Regulatory and Development Authority of India (IRDAI) is gearing up to introduce a groundbreaking insurance offering known as “Bima Vistar” on January 1, 2024. This innovative product, developed in collaboration with the General Insurance Council and Life Insurance Council, represents a significant milestone in the insurance industry.
Bima Vistar is a comprehensive bundled insurance product designed to offer a single, affordable policy that encompasses life, health, casualty, and property coverage. This initiative simplifies insurance for individuals by providing coverage for various aspects of their lives within one policy.
Key features of the Bima Vistar policy: include coverage for life, health, accident, and property. IRDAI will oversee the policy through a centralized portal dedicated to claim settlement, ensuring efficiency and ease of access for policyholders.
Under this product, policyholders will benefit from coverage of Rs 2 lakh each for life and accident, Rs 1 lakh for property, and Rs 500 per day for hospitalization. The annual premium for Bima Vistar is expected to range from Rs 800 to Rs 1,200, making it an affordable choice for a wide range of individuals.
To enhance coverage, individuals have the option to purchase multiple policies under their name. Bima Vistar will be managed by life, general, and standalone health insurers, further streamlining the insurance process.
Premium payments will be collected through the centralized portal, and claims will be distributed among insurance companies according to their market share. Additionally, there is a possibility that the premium for the Bima Vistar product may be exempt from the Goods and Services Tax (GST).
The introduction of this standard insurance product aligns with the objective of providing comprehensive insurance coverage to all citizens. Bima Vistar policies will be made available through an agency called “Bima Vahak” representing all insurance companies.
While the launch of Bima Sugam is reportedly delayed, the IRDAI has laid down a regulatory framework for the distribution of Bima Vistaar. On 9th October 2023, IRDAI issued the Insurance Regulatory and Development Authority of India (Bima Vahak) Guidelines, 2023 (“Guidelines”) to establish an insurance distribution channel specifically dedicated to rural areas. The Guidelines nudge insurers to progressively engage Bima Vahaksin every Gram Panchayat in India before 31st December 2024. The Guidelines will come into effect as and when IRDAI launches Bima Vistaar.
STRUCTURE AND REGULATORY FRAMEWORK
The contours of the Bima Vahak distribution channel run parallel to those of the agent distribution channel. A Bima Vahak may be an individual (“Individual Bima Vahak“) or a legal person (“Corporate Bima Vahak“) that engages multiple Individual Bima Vahaks.To become a Bima Vahak, an individual or enIty must enter into an agreement with the insurer.
However, unlike typical IRDAI regulations on insurance intermediaries, the Guidelines do not specify any eligibility criteria, any licence requirements, or any limit on the number of insurers that a Bima Vahak may partner with. Additionally, while the IRDAI encourages Bima Vahaks to be women-centric, this is not mandatorily required under the Guidelines.
The Guidelines merely constitute a preliminary framework issued to prepare the insurers for Bima Vahaks and Bima Vistaar. The Life Insurance Council and the General Insurance Council will jointly issue standards to govern Bima Vahaks.
Such standards will include:
a. minimum educaIonal standards for Bima Vahaks;
b. scales of commissions for Bima Vahaks;
c. training requirements (including customer due diligence/ KYC process, personal data protecIon, policy handling and claims service support) for Bima Vahaks;
d. standard terms of appointment (including due diligence requirements, issuance of idenIficaIon cards) for Bima Vahaks;
e. maintenance of database (including confidenIality of the policy data solicited through Bima Vahaks); and
f. other operaIonal and compliance aspects.
SCOPE OF SERVICES
A Bima Vahak will act on behalf of its partner insurers to solicit business for Bima Vistaar, issue and service insurance policies, and assist the policyholder with claim sseBlement. Interestingly, a Bima Vahak can sell and service insurance only using handheld electronic communication devices directly integrated with the electronic placard of the insurers. The Bima Vahak may use such devices to file proposal forms, undertake KYC, and collect insurance premiums as well. On receipt of premiums, an electronic acknowledgement must be issued to the policyholders in a regional language, Hindi or English. While Bima Vahak cannot collect any fees other than the insurance premium, we expect Bima Vahaks to be paid for their services directly by the insurer.
In light of the functionalities described above, insurers are expected to invest in appropriate systems processes, internal controls and infrastructure to enable seamless interface with all Bima Vahaks. Additionally, insurers must implement appropriate measures to ensure business continuity, given that the Guidelines require them to ensure uninterrupted service to the policyholders.
OBLIGATIONS OF INSURERS AND CONSUMER PROTECTION
Insurers must designate a Complaints Handling Officer in a local office nearest to the Gram Panchayat, to specifically a Bend to the complaints against Bima Vahaks. Additionally, insurers and Corporate Bima Vahaks must issue identification cards to Individual Bima Vahaks Further, Corporate Bima Vahak, at each of its retail outlets, must display the following:
a. the names of the Bima Vahak, name of the appointing insurer and telephone number(s) of the branch or other controlling office of the insurer;
b. a signage indicating the services offered by the Bima Vahaks;
c. the contact details of designated Grievance Redressal Officer of the insurer;
d. the name and contact details of the Complaints Handling Officer designated to specifically address complaints against Bima Vahaks; and
f. the contact details of the Insurance Ombudsman.
Additionally, the Guidelines require insurers to:
a. remain responsible for the conduct of Bima Vahaks.
b. implement a board-approved policy in respect of maBers related to Bima Vahaks; and
c. ensure KYC and AML compliance with respect to policies sourced through Bima Vahaks.
CONCLUSION
Over the past few years, the IRDAI has taken steps to foster innovation in the insurance sector and extend insurance coverage. For instance, IRDAI has decided to hold periodic open house discussions with insure-techs, extended the ‘use and file’ procedure to most insurance products, and partnered with the National Health Authority to lay down building blocks of the National Health Claims Exchange. Recognition of Bima Vahaks as a women-centric distribution channel is another welcome step in this regard, and it appears that the IRDAI is learning from other regulators.
IRDAI’s Bima Vahaks build upon the success of similar initiatives in the banking and pension sectors. Bima Vahaks serve similar purposes as the ones fulfilled by business correspondents engaged by banks and points-of-presence, i.e., last-mile grassroot coverage of regulated products. Bima Vahaks and business correspondents do not require licences and their activities are primarily governed by a contract. Accordingly, barriers to entry are relatively low. This is quite significant in the insurance sector, given that the distribution and solicitation of insurance business was considered to be highly regulated. The Guidelines also reflect IRDAI’s inclination towards self-regulation, a practice prominent in the securities market.
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DISCLAIMER: the article presented here is only for sharing information with readers. The views are personal, shall not be considered as professional advice. The author has taken all reasonable steps to present true and fair views before readers. In case of necessity do consult with professionals.
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