Code of good business practices

1. General provisions

1.1 The objective of this code is to set standards of business practice that are good for the image of the insurers and in the best interests of their policyholders. This Code applies to general insurance business and is intended for observance by all executives of insurers.

1.2 Any incident of violation of this Code may be reported in the first instance to the CEO of the insurer concerned by any person affected by such violation. If the CEO fails to take prompt corrective action and set right any wrong that may have occurred, it may be referred to the Secretary General of the General Insurance Council who shall take appropriate action to remedy the matter and if necessary, make a reference to the Executive Committee or even to the Authority. It shall be the endeavor of everyone to ensure maintenance of the high standard of conduct by insurers that the Code is designed to achieve and so, prompt reporting of any violation of the Code shall be considered an essential duty. Likewise, the insurer against whom a complaint is made, shall sincerely examine the matter under complaint and take prompt action to rectify any lapses.

1.3 The General Insurance Council may amend the provisions of this Code in the light of developing market circumstances so that at all times the provisions of the Code will remain appropriate to achieve the objectives.

1.4 This Code shall be interpreted in spirit and always in the manner appropriate to uphold high standards of conduct in business.

 

2. Application of the law and regulations and guidelines

2.1 This Code does not replace the provisions of the Insurance Act or the IRDA Act or the Regulations or the directions, guidelines or instructions issued by the Authority. If there be any divergence in requirement of this Code from the above-mentioned law etc. the provisions of that law etc. shall prevail.

 

3. The sales process and design of insurances

3.1 The insurers and all intermediaries working on behalf of the insurers should present a true and fair view of the product being sold to a proposer. The scope of cover, the exclusions and limitations of cover, the conditions that the policyholder is required to comply with, the claims intimation and documentation requirements, loss minimization requirements before and immediately after a loss, the in-house machinery for grievance redressal and the external avenues for resolving disputes shall all be informed to the proposer or policyholder in clear and simple language at the point of sale.

3.2 In designing insurance products the insurer should keep in mind the best interests of the policyholders and offer appropriate protection without jeopardizing underwriting standards and at rates and terms that are fair as between the client and the insurer.

3.3 Insurers will not use unlicensed intermediaries or sales channels that have the effect of circumventing the legitimate sales channels or use of unprofessional sales methods.

3.4 Insurers will not agree to provide any remuneration or financially significant facility to the licensed intermediaries or others that have the effect of exceeding the limits of remuneration allowed by regulations or circulars of the Authority, in whatever manner.

3.5 An insurer shall not engage in any activity that has the effect of offering an additional inducement to the insured or any one associated in the purchase of insurance, in any form, to influence the placement of the insurance with it.

3.6 An insurer shall not be a party to any insurance plan where the benefit of the financial terms accrues to an intermediary or person associated with the insurance plan at the cost of the insured persons. Any reductions in premiums should accrue to the benefit of the persons insured.

3.7 As far as practicable, every proposal for insurance should be based on a proposal form that contains questions dealing with all information that is relevant to the assessment of risk and ensures disclosure of all material information by the proposer.

3.8 Where the proposer is required to complete a questionnaire in addition to the proposal form for the purpose of assessment of the risk, the questions should be comprehensive and in simple language and the proposer should be made aware that the duty of full disclosure applies equally to the questionnaire.

3.9 It is expected that insurers will use policy and endorsement wordings for various covers as per wordings agreed among all insurers. The underlying principle in drafting such wordings will be to provide the best possible cover with appropriate underwriting safeguards and express the intentions in simple language. Any departures from such wordings should be clearly stated and should be based on sound underwriting considerations and should carry appropriate premium for any additional cover.

3.10 In types of insurances where the policyholder has a reasonable expectation of renewal, the insurer should make it clear even at the point of first sale, if it wishes to retain the right not to renew or to offer renewal at higher terms or with restrictions on cover. Where the insurer wishes to exercise this right, it should give reasonable notice to the policyholder before the date of expiry of the current cover with regard to the renewal and the terms so that the policyholder has adequate time to look for cover elsewhere if he so wishes.

 

Competition

4.1 Insurers should refuse to tender for business where they are not allowed an opportunity to seek underwriting information to help them assess the risks and quote a proper rate.

4.2 Insurers should use market standard information forms to elicit information on risks offered for insurance as a minimum standard of information to be provided. This will be without prejudice to the right of an underwriter to require more information or an inspection of the risk prior to offering quotation for cover.

4.3 Insurers should report to the Authority any cases of improper conduct of brokers or non-compliance with the IRDA guidelines on insurance and reinsurance of general insurance risks by any broker or other insurer.

4.4 Insurers shall not offer illegitimate inducements to influence business to themselves.

4.5 When competing for business, insurers shall be mindful of the importance of sound underwriting. Freedom in rating should be used in a judicious manner.

4.6 Where a client (or its broker) decides to move an insurance from one insurer to another, the insurer who is taking over the account is encouraged to check with the previous insurer regarding the claims experience and other matters relevant to underwriting and the previous insurer should furnish the information promptly.

4.7 Where an account is introduced to an insurer by a broker for quotation of terms, the insurer should not thereafter approach the client to place the insurance directly with it. This does not bar an insurer who is already trying to win over a client's account from refusing to quote to a broker on that account.

4.8 Where an insurer complains of unfair competition by another insurer, the Secretary General may call the two insurers together for a meeting to look into the matter and ensure that competition remains on a fair and technically sound footing.  

 

Claims handling and grievance redressal

5.1 Insurers shall establish claims settlement procedures in a time-bound manner to assure prompt, fair and friendly settlement of claims. The claims procedures and time schedules shall be publicly disclosed at the insurer's offices and website. The claims forms and instructions for documentation of a claim shall be posted on the website to enable any person wishing to file a claim to download and print them for his use. Insurers may also consider on-line filing of claims intimations.

5.2 As far as possible, the claimant shall be informed of all documentation requirements and all queries arising from the claims documents shall be raised at one time. The insurer should be mindful of not being seen as reluctant to process a claim to settlement.

5.3 An in-house review machinery to resolve any disagreements in respect of a claim between the claims staff of the insurer and the claimant should be established and activated in cases of claimant dissatisfaction.  

 

Grievance redressal machinery

6.1 The Grievance redressal machinery of an insurer should act in an impartial manner and handle grievances with sympathy for the claimant.

6.2 Disposal of grievances should be made subject to specified time schedules so that the complainants are not put to unnecessary delays in being attended to.

6.3 Information on the further avenues open to the aggrieved party to seek redressal of his grievance should be made known to him when sending him the final response.