Insurance News

Taken multiple insurance policies? You can no longer hide it from other insurers!

As the motive of insurance is to cover the financial loss due to an unfortunate happening of an insurable event, there is a limit on the insurance cover one may opt for.

For example, the motive of life insurance is to cover the loss of income due to early demise of a breadwinner. So, the maximum amount of insurance cover such a person may take will depend on his/her earning level and the remaining working life.

Similarly, the motive of general insurance is to cover expenses needed to repair or replace an insured property due to the happening of an insurable event.

So, the motive of insurance is not to gain, but to cover the losses, there is a limit up to which a person may take an insurance cover. To ensure that a person doesn’t take excess insurance cover, an applicant is asked to reveal all the details of insurance covers taken from the same insurer or other insurers at the time of applying for an insurance – be it a life insurance, health insurance or general insurance.

Many people ignore such rows or columns given in application forms thinking it’s unnecessary or to save time and effort while filling a form. Some persons may even intentionally suppress such information for unlawful gains.

However, inclusion of insurance in the Account Aggregator system will make it difficult to hide or suppress such information as all the insurance-related information will be available electronically at one place.

The Insurance Regulatory and Development Authority of India (IRDAI), in a circular to insurance companies on November 15, 2022, provides a guideline on how they can share insurance related data with account aggregators (AA).

As a result, account aggregators – basically Non Banking Financial Companies (NBFCs) who retrieve financial information from various entities to provide all savings and investment data at one place – will be able to gather insurance related information along with investment related information.

“The Reserve Bank of India (RBI) has already instituted a framework of RBI-registered Account Aggregators, who are authorised to collect information on financial assets of customers – like the details of Savings Bank Account, Bank Deposits, Mutual funds, Insurance Policies, Pension Funds, etc – and sharing of such financial information to end-users – like customers, lenders including Banks, NBFCs (for assessing loan repayment capacity) as well as to insurance companies (to assess the Sum Assured limit and ability to pay premiums),” said Conjeevaram Baradhwaj, Executive Vice President (Legal & Compliance) & Company Secretary at Future Generali India Life Insurance Company Ltd.

Data Collection

Participation of insurers in the above process not only enables the insurance companies to share financial information, but also obtain information for financial underwriting. Information will be collected and shared electronically, to avoid unnecessary paperwork.

Data Protection

Entities sharing and receiving information will use APIs (Application Programming Interface) to integrate with Account Aggregators’ system.

Since sharing of customer financial information is based on a prior consent of the customers and the information can be shared only with regulated entities. Moreover, IRDAI have advised insurers to ensure data protection while sharing information with Account Aggregators. These measures ensure that the interests of customers are protected.

“This is a welcome step in the right direction aimed at supporting the insurance digitisation project announced by IRDAI,” said Baradhwaj.

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