Bima Sugam will bring positive change-more clarity needed as platform develops

The Insurance Regulatory and Development Authority of India (IRDAI) will soon roll out Bima Sugam, an online marketplace for buying and selling of insurance policies, which could be a UPI-like (united payment interface) moment for the industry, IRDAI chairman Debasish Panda said at the CII Annual Session 2023.

“We are working with insurance councils to create a UPI-like moment for the insurance industry. The conceptual framework is in place. The execution will start soon,” he said. Not only enable buying and selling of insurance policies but Bima Sugam will also facilitate in settlement of claims.

The insurance industry welcomed the move in a recent webinar on Bima Sugam conducted by PHD Chamber.

“The first thing which all of us should realise is that setting up Bima Sugam is not going to happen in a very short period of time. It will take time because setting up a marketplace is not a simple process. So, my suggestion would be that Bima Sugam should come in phases probably. We should start with a product, like health, then move to life, then to motor and then spread it to other products,” said G Srinivasan, former director of National Insurance Academy and Chairman/ MD, The New India Assurance Co. Ltd.

The second suggestion by Srinivasan was who is really going to run this entity. “The regulator can only motivate and the regulator cannot do business. Similarly, the insurance industry cannot do business. I mean insurance industry can take an equity stake in Bima Sugam, but I don't think they will be able to run it. So, you need somebody an entrepreneur, a promoter who can really run it, because without leadership it will face difficulty.”

Another expert also raised the question that the difference in pricing may require removal of the Section 41 of the Insurance Act 1938 which prohibits reducing the premium in lieu of remuneration. “On Bima Sugam all the products of all insurers will be available without the addition of any distribution cost, which means the present premium rates are expected to reduce by 20 per cent, which is the present distribution cost. It is also proposed that if any customer wish to avail the services of any distribution channel the additional cost of 1/10 of the current cost say 10 per cent on motor will be added in the premium,” said Sudhir Kumar Jain, an insurance professional.

Jain said, "Once the Bima Sugam platform started, where the premium rates are available, keeping in view the price difference the customer may negotiate with the distribution channel to reduce their cost, which means the distribution is based on the recommendation of the customer, which is fee module and not the century-old system of payment of remuneration by the insurer."

However, there was general consensus that this marketplace will result in increased penetration of insurance, higher insurance density, and improved customer satisfaction through cost-competitive insurance products. “This is very necessary to fulfil the aspirations of our growing nation which is going to be 3rd largest economy in the world.  We are sure that aspects like data privacy and cyber security will be kept in mind and Bima Sugam will be adequately funded with equity to achieve the objective for which it is being set up,” said S K Sethi, founder & CEO, Insurance Foundation of India.

Talking about implementation, Pritpal Singh, Chief Operating Office, Safeway Ins. TPA, said one of the needs would be to integrate the portal with TPAs for efficient claim settlement. “Linking the whole claim processing through the portal in soft form needs multiple changes at the first point in vision, audit process, orientation, cyber security concerns, medical privacy and health regulations. We as TPA are already equipped with our own portal and paperless claim processing system but that needs to be validated by the respective insurance companies for swift claim services managing fastest TATs.”

Singh also shared his views on the intermediary fees part, “The upper limit is already fixed at 5.5 per cent of the premium but on account of making the portal cost savvy if remunerations to various intermediaries also get cut then it shall be a challenge for TPA as we are the service providers for complete 12 months and beyond as well with heavy costing on services and other overhead expenses.”

Raising the viewpoint of the consumer Bejon Kumar Misra founder of Consumer Online Foundation said, “The government wants that, we must have products/ pricing of the large number of insurance providers available in the country similar to Brokers, Agents, Technology Platforms, and Aggregators. We can have a choice and then we can have increased penetration. As you all know, India is very low in rank in insurance density cover and we have to go to the next higher level.”