In its Consultation Paper on Distribution Reforms, the regulator has identified Bima Sugam as a market infrastructure institution (MII) for the insurance sector. All but three insurers are shareholders in Bima Sugam India Federation, the company that is setting up the Bima Sugam digital platform.
IRDAI said it expects Bima Sugam to become fully operational at the earliest, with a wide range of life and general insurance products.
The regulator also sees scope for more such platforms, with the broader aim of improving customer value while allowing insurers to remain profitable.
These platforms are proposed to be not-for-profit companies with broad participation from insurers. At least 11 insurers would need to come together to set up an MII, with no single insurer allowed to have significant control.
Once an MII is fully operational, each shareholder insurer would have to hold less than 10% of its shares or voting rights.
During the initial years, a lead promoter could hold up to 20% to help set up and run the platform. Its holding would then have to fall to 15% within five years and below 10% within seven years.
IRDAI said these platforms could get preferred distribution status because they would provide a low-cost and neutral way to buy insurance digitally. However, they would have to follow a transparent fee structure that is significantly lower than current distribution commission rates.
The platforms would also have to give insurers a level playing field to compete on product features, pricing, performance and the quality of claims and grievance services.
Public Insurance Registry
IRDAI has also proposed the Public Insurance Registry (PIR) as another MII.
The PIR is envisaged as a national digital system that would help customer-facing platforms such as Bima Sugam find, verify and exchange insurance-related information.
The regulator sees the PIR as a common digital infrastructure that can help insurers and other market participants improve efficiency, expand coverage and develop new products and services.
The broader goal is to move insurance away from the traditional model where “insurance is sold” towards one where “insurance is also bought” — giving customers a more active role in choosing and purchasing policies.
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