Securities and Exchange Commission of Pakistan (SECP) has issued the requirements for insurance policies being sold through mobile network operators (MNOs) and internet.
Under ‘The Securities and Exchange Commission (SEC) Directive for the Corporate Insurance Agents (excluding Banks) and Technology Based Distribution Channels, 2017’ issued by the SECP, the commission has explained the provisions to be complied with when mobile network operator (MNO) or internet is involved in insurance distribution.
Special requirements have been laid down by the SECP relating to the sale of insurance through technology based distribution channels.
Non-life insurance, personal lines products and life insurance protection products sold through mobile and internet will be subject to Customer Due Diligence (CDD)/ Know Your Customer (KYC), for the purposes of compliance with the SRO 20(I)/ 2012 dated January 11, 2012, if the conditions given in sub clause (a) and (b) are met.
According to S.R.O.1236(I)/2017 issued by the SECP, the distribution of insurance products through mobile network operator (MNO) or internet, will be governed by the provisions of the SECP directive. The MNO may, or may not be working as an agent.
The MNO or the broker may be entrusted with responsibility of data storage and management on behalf of the insurer. However, it is a responsibility of the insurer to ensure safety of policyholder data.
The insurer will make sure that suitable mechanism, including the data backup system, is in place to store data and maintain its safety before delegation of this function to MNO or the broker.
File and Use Procedure for Products Distributed Through MNOs and The Internet
- All life insurers are required to submit the details of the products (as stipulated) which they intend to distribute through the MNO, whether as a loyalty or voluntary product, to the Commission at least thirty days before the intended date of launch of that product as per “file and use” procedure.
- In addition to the existing product submission requirements for the life insurance products, life insurers are required to submit the complete distribution plan with respective roles and responsibilities of each intermediary involved, the enrollment process and the premium payment mechanism.
- The information regarding responsibilities of each party in respect of claim processing and complaints handling is also required to be submitted.
- Details of products which are already launched before the issuance of this directive are required to be submitted within 30 days of issuance of this directive.
- The life insurance products already approved by the Commission under existing “file and use” procedure are not required to be resubmitted, SECP said.
Communication of All Terms and Conditions Through Mobile and Internet
- In addition to the product details submitted as required, the life insurer is required to submit the manner and process to communicate all terms and conditions of policy to the policyholder through the chosen mode of communication whether through SMS, call or internet, or otherwise.
- The life and non-life insurer is required to ensure that the key facts such as sum assured/ policy benefits, premium amount, free look period, period of coverage and any other material fact, are communicated to the prospective policyholder before the offer to insurance contract is made.
- The detailed terms and conditions are required to be communicated to the policyholder after issuance of insurance policy and the onus of such communication as stated in this sub-clause lies on insurer.
- In case of loyalty products, the insurer is required to ensure that a mechanism is in place to make the policyholder aware about coverage to which he/she is entitled, and manner of communicating complete terms and conditions to the policyholder is in place soon after he/she becomes entitled to the coverage.
Due Diligence Requirements for Policies Sold Through MNOs and The Internet
The non-life insurance, personal lines products and life insurance protection products sold through mobile and internet will be subject to Customer Due Diligence (CDD)/ Know Your Customer (KYC), for the purposes of compliance with the SRO 20(I)/ 2012 dated January 11, 2012, if the conditions given are met.
The products are simple with minimum exclusions and it is practically possible to communicate all policy terms to the policyholder through the chosen mode of communication, SMS, call, or internet.
The premium limit will be revised on January 1 of each year based on the percentage increase in Consumer Price Index (CPI) for the immediately preceding calendar year. The aforementioned limit will apply on per policyholder and type of insurance coverage that has been obtained by the policyholder.
For products which do not meet the aforementioned conditions stated in 1(a) and 1(b), the Enhanced Due Diligence requirements will apply as per clause 4(viii) of SRO 20(I)/ 2012 dated January 11, 2012.
The Commission may revise the aforementioned conditions and thresholds from time to time.
In case of involvement of MNO in the distribution arrangement, whether in capacity of corporate insurance agent or otherwise, the insurer is required to clearly stipulate the roles and responsibilities of each party involved such as the insurer, insurance broker, MNO and Third Party Administrator (TPA), if any, in the agency agreement required to be submitted to the Commission under this directive.
In case the MNO or broker intends to exit the agency agreement, it will continue to perform its role in policy administration cycle for the policies distributed during the time when he was part of distribution arrangement under the valid agency agreement.
If MNO or insurance broker cannot continue to play its role due to an unavoidable reason, it is required to obtain approval of the Commission for exit of such MNO or insurance broker from policy administration cycle while submitting to the Commission the mechanism through which the existing policyholder will be informed about change of roles between the parties involved.
If there’s a change in roles of any of the parties involved, the policyholder will be communicated through effective and utmost effort will be made to ensure that this information has been effectively communicated to the policyholder, SECP added.