[Analysis] Revolutionizing Insurance in India – IRDAI Launches Bima Sugam
- Blog|Advisory|FEMA & Banking|
- 5 Min Read
- By Taxmann
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- Last Updated on 25 April, 2024
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Bima Sugam is an Insurance Electronic Marketplace established under the regulations unveiled by the Insurance Regulatory and Development Authority of India (IRDAI) in 2024. It functions as a comprehensive digital public infrastructure offering a one-stop platform for all insurance needs. This marketplace facilitates the purchase, sale, servicing of insurance policies, settlement of insurance claims, grievance redressal, and other related matters as permitted by the Authority.
Table of Contents
- What is ‘Bima Sugam – Insurance Electronic Marketplace’?
- Why is Bima Sugam – Insurance Electronic Marketplace necessary?
- How will customers benefit from ‘Bima Sugam – Insurance Electronic Marketplace’?
- Bima Sugam – Insurance Electronic Marketplace to be a ‘Not for Profit’ company
- What are the functions and responsibilities of the ‘Bima Sugam Company’ and the Marketplace?
- Marketplace Security – Compliance and Standards
- Power of Authority to conduct Enquiry, Investigation, Inspection and call for information
- Conclusion
Introduction
On March 20, 2024, a significant milestone was achieved as the Insurance Regulatory and Development Authority of India (IRDAI) unveiled the IRDAI (Bima Sugam-Insurance Electronic Marketplace) Regulations, 20241. These regulations represent a significant step in empowering and safeguarding policyholders’ interests, increasing insurance penetration in India and enhancing accessibility through the establishment of the innovative Digital Public Infrastructure called ‘Bima Sugam – Insurance Electronic Marketplace’.
With these regulations, a strong framework is laid out for the establishment, governance and functioning of the Bima Sugam – Insurance Electronic Marketplace, a company formed to advance the insurance landscape in India.
1. What is ‘Bima Sugam – Insurance Electronic Marketplace’?
The Bima Sugam – Insurance Electronic Marketplace is a robust Digital Public Infrastructure with open standards and interoperable platforms, enabling seamless integration with various services to facilitate inter alia, purchase, sale, servicing of insurance policies, and settlement of insurance claims, grievance redressal and other related matters as permitted by the Authority.
2. Why is Bima Sugam – Insurance Electronic Marketplace necessary?
Bima Sugam – Insurance Electronic Marketplace is necessary for several reasons. Firstly. Intermediaries, such as agents or brokers sometimes prioritize their commissions over the best interests of the customers leading to mis-selling of insurance products that may not suit the customers’ needs.
Secondly, delays or difficulties in the claim settlement process can leave policyholders feeling frustrated towards insurers. Thirdly, some individuals may believe that insurers intentionally complicate the claim process leading to uncertainty about insurance coverage.
Fourthly, the large volume of information involved in purchasing insurance can be overwhelming for consumers. This complexity may deter them from understanding their coverage options or even discourage them from purchasing insurance altogether. Lastly, insurance premiums may seem unaffordable to a large portion of the population. The perception of high costs can deter individuals from seeking insurance coverage. Thus, Bima Sugam is a one-stop platform where Indians can explore, compare and buy insurance policies offered by different companies with ease.
3. How will customers benefit from ‘Bima Sugam – Insurance Electronic Marketplace’?
This platform would serve as a single destination for all insurance stakeholders, including consumers, insurers, intermediaries and insurance agents aiming to promote transparency, efficiency, and collaboration across the entire insurance value chain. It seeks to drive technological innovation in the insurance sector, universalize and democratize insurance and work towards achieving the vision of “Insurance for all by 2047”.
Bima Sugam could reduce the dependence of insurance companies on intermediaries and promote the sale of products via direct digital means.
4. Bima Sugam – Insurance Electronic Marketplace to be a ‘Not for Profit’ company
The Bima Sugam – Insurance Electronic Marketplace must be established by a not-for-profit company formed under section 8 of the Companies Act, 2013. Further, no other person must commence or operate with similar objectives of the marketplace and functions of the company.
The main objective of the company is to establish, facilitate, develop, operate and maintain the marketplace for providing various services to insurance stakeholders.
After incorporation, the company must file the MOA and AOA with the Authority. Further, any amendment to the MOA must be undertaken only with the prior approval of the competent authority.
4.1 Shareholding of ‘Bima Sugam – Insurance Electronic Marketplace’ Company
The shareholding of the company must be widely held amongst life insurers, general insurers and health insurers with no single entity having a controlling stake. Further, the company must transmit, issue any new shares or register the transfer of shares only with the prior approval of the competent authority. This is expected to reduce the cost of insurance for customers.
4.2 Governance framework of the Bima Sugam – Company
The company must have well-documented board-approved policies, procedures, and governance arrangements for its functioning which must include operational, risk management and internal controls. Further, the company must have up to 2 nominees from IRDAI on its Board.
In addition to its regular functions, the Board must ensure that the marketplace operates within the objectives of these regulations. Its decisions should reflect the genuine and legitimate interests of insurance stakeholders, and the systems designed must adhere to high standards of security and privacy. Further, the Board must implement an appropriate business continuity plan to address both external and internal disruptions.
4.2.1 Risk Management Committee for operational and risk management policies
The Board must establish a Risk Management Committee to ensure that operational and risk management policies, procedures, systems and controls are in place. These measures enable the company to identify, measure, monitor, manage and mitigate various risks including third-party service providers.
5. What are the functions and responsibilities of the ‘Bima Sugam Company’ and the Marketplace?
The functions of the company and the marketplace are as follows –
- Creating efficient and effective end-to-end digital solutions to meet the requirements of the insurance stakeholders and the market it serves.
- Allowing fair and open role-based access to its services.
- Implementing consent-based architecture for its services.
- Ensuring that it is operative and accessible at all times.
- Ensuring access to data providers with appropriate consent mechanisms.
- Delivery of its obligations in accordance with the objectives of these regulations.
- To define and enforce the participation criteria and operating guidelines for the insurance stakeholders.
- Any other function as may be specified by the Authority from time to time.
Further, insurers must also endeavour to facilitate the availability of their insurance products for sale and provide all services related to an insurance policy. This includes settlement of insurance claims and grievance redressal in the marketplace on an ongoing basis.
6. Marketplace Security – Compliance and Standards
The design of the marketplace must include appropriate security mechanisms, up-to-date latest technology and privacy standards that will ensure open and fair access, and confidentiality by adopting best practices to address current and future security requirements.
Further, participation in the marketplace must be subject to compliance with security protocols laid down by the company.
7. Power of Authority to conduct Enquiry, Investigation, Inspection and call for information
The Insurance Regulatory and Development Authority of India (IRDAI) may conduct an enquiry, investigation, or inspection of the books of accounts, records, documents and infrastructure, systems and procedures of the company. The company is required to provide all necessary documents and information and access as required.
The competent authority may issue circulars, guidelines and directions in relation to the marketplace and the company. It may also issue directions to the company in the interest of insurance stakeholders.
Further, the IRDAI may initiate appropriate actions against the company and/or the regulated entities for violation of the provisions of these regulations, any circulars, guidelines, or orders issued by the competent authority.
8. Conclusion
Overall, the Bima Sugam – Insurance Electronic Marketplace is ready to transform the insurance industry. It’s introducing a user-friendly digital platform for all insurance transactions. This move is expected to enhance transparency and efficiency within the insurance sector, benefitting both insurers and policyholders. This innovative marketplace has the potential to drive greater consumer satisfaction and market growth, aiming to make insurance simpler and more satisfying for everyone.
- Notification No. F. No. IRDAI/Reg/5/199/2024; dated: 20.03.2024
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