Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
11,993.6053.5
Stock Analysis, IPO, Mutual Funds, Bonds & More

Birla Sun Life official questions dual pricing of insurance policies

In his petition Mahtani suggests that IRDA should step in to regulate the rates offered by direct marketing verticals of insurance companies. I

, ET Bureau|
Updated: Jul 18, 2017, 12.26 PM IST
0Comments
A discounted premium is a “rebate in disguise” which law prohibits, said the Birla Sun Life official who has been with the company for 16-plus years.
A discounted premium is a “rebate in disguise” which law prohibits, said the Birla Sun Life official who has been with the company for 16-plus years.
MUMBAI:In an unusual development, a senior official of a large life insurer has launched an online petition to mobilise support against ‘dual pricing’ pursued by insurance companies to prune cost.

The practice of charging lower premium to customers who bypass agents to buy policies directly from life companies can not only cause serious disruption, it is also “unfair”, “unethical” and violates a key provision of Insurance Act 1938, according to the petitioner Prakash Mahtani, managing partner at Birla Sun Life — a joint-venture between Aditya Birla group and Sun Life Financial Inc of Canada.

A discounted premium is a “rebate in disguise” which law prohibits, said the Birla Sun Life official who has been with the company for 16-plus years.

Almost all insurance companies (including Birla Sun Life) have differential pricing. Every product filed with Insurance Regulatory & Development Authority (IRDA) has dual pricing — one for offline purchase and the other for online. When a company directly sells to customers, IRDA insists that companies need to pass on the benefit.

Thus, while there are no discounts on premiums on policies sold by intermediaries like individual agents, corporate agents, banks and insurance brokers, the rate could be 2% to 10% lower on those sold by ‘direct marketing teams’ of insurance companies. With companies aggressively pushing direct marketing, Mahtani — who has put out his views and suggestions on the petition website change.org — believes that such predatory pricing could severely hurt the insurance industry in the near term, besides impacting 2.2 million intermediaries who for decades have been the backbone of the industry, helping it to expand the insurance market.

It is not known how Mahtani’s petition has gone down within Birla Sun Life. Mahtani did not comment on the matter while a company spokesperson said: “The petition has been filed by Mr. Prakash Mehtani in his personal capacity and does not represent the views of the company. Birla Sun Life Insurance Company Limited practices are always aligned with the industry and regulations prescribed by the regulator.” Out of Birla’s 20 products, more than 15 carry direct marketing discount. The online petition, floated a few a months ago, was reactivated recently with the company official posting it on Facebook. Mahtani, however, has added a disclaimer, clarifying that the views and opinions expressed in the petition are solely his and do not reflect the official position or views of any company.

Online sales generated 1% of the premium in FY16 and more than 2% in health insurance sales, but is said to be growing at a fast clip. Direct marketing is catching on in offerings like term insurance (or pure protection plan), unit-linked products, as well as in savings-based traditional products like endowments. In the past six months, insurers have intensified their focus on direct sales.

An industry official who has read the petition said, “Mahtani is not against companies competing with each other. What he seems to be objecting is a company charging two prices for the same product to two different customers – online and offline.”

In his petition Mahtani suggests that IRDA should step in to regulate the rates offered by direct marketing verticals of insurance companies. IRDA, however, has taken the Sebi approach on the subject: the capital market regulator has permitted lower charges on direct sale of mutual funds. “But mutual fund is a very different product and there is no law that is against such dual pricing or charges on MF schemes,” said the person.



Also Read

Dual pricing of diesel makes no sense

CoalMin opposes proposal for dual pricing of coal

CII demands dual pricing of diesel

Market reality: Government slips on dual pricing for diesel

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service