Grievance Redressal Mechanism, Protection of Policyholders’ Interest Regulations , Anti Money Laundering (AML) /Know Your Customer (KYC), Dos and Don’ts for POS Person

 

TOPICS COVERED

1. Grievance Redressal Mechanism

2. Protection of Policyholders’ Interest Regulations

3. Anti Money Laundering (AML) /Know Your Customer (KYC)

4. Dos and Don’ts for POS Person

1. Grievance Redressal Mechanism

Grievance/Complaint:

A “Grievance/Complaint” is defined as any communication that expresses dissatisfaction about an action or lack of action, about the standard of service/deficiency of service of an insurance company and/or any intermediary or asks for remedial action.

On the other hand, an Inquiry and Request would mean the following:

Inquiry: An “Inquiry” is defined as any communication from a customer for the primary purpose of requesting information about a company and/or its services. Request: A “Request” is defined as any communication from a customer soliciting a service such as a change or modification in the policy.

Grievance Redressal Policy:

Every insurer shall have a Board approved Grievance Redressal Policy which shall be filed with IRDA.

Grievance Officer/s:

Every insurer shall have a designated Grievance Officer of a senior management level. Senior Management would mean either the CEO or the Compliance Officer of the company. Every office other than the Head/Corporate/Principal officer of an insurer shall also have an officer nominated as the Grievance Officer for that office.

Grievance Redressal System/Procedure:

Every insurer shall have a system and a procedure for receiving, registering and disposing of grievances in each of its offices. This and all other relevant details along with details of Turnaround Times (TATs) shall be clearly laid down in the policy. While insurers may lay down their own TATs, they shall ensure that the following minimum time-frames are adopted:

• An insurer shall send a written acknowledgement to a complainant within 3 working days of the receipt of the grievance.
• The acknowledgement shall contain the name and designation of the officer who will deal with the grievance.
• It shall also contain the details of the insurer’s grievance redressal procedure and the time taken for resolution of disputes.
• Where the insurer resolves the complaint within 3 days, it may communicate the resolution along with the acknowledgement.
• Where the grievance is not resolved within 3 working days, an insurer shall resolve the grievance within 2 weeks of its receipt and send a final letter of resolution.
• Where, within 2 weeks, the company sends the complainant a written response which offers redress or rejects the complaint and gives reasons for doing so,

     i.        the insurer shall inform the complainant about how he/she may pursue the complaint, if dissatisfied.

    ii.        the insurer shall inform that it will regard the complaint as closed if it does not receive a reply within 8 weeks from the date of receipt of response by the insured/policyholder.

8 weeks from the date of receipt of response by the insured/policyholder. Any failure on the part of insurers to follow the above-mentioned procedures and time-frames would attract penalties by the Insurance Regulatory and Development Authority. It may be noted that it is necessary for each and every office of the insurer to adopt a system of grievance registration and disposal.

5. Turnaround Times: There are two types of turnaround times involved.

     i.        The service level turnaround times, which are mapped to each classification of complaint (which is itself based on the service aspect involved).

    ii.        The turnaround time involved for the grievance redressal.

As to (i), the TATs are as mapped to the classification and prescribed by the Authority to insurers. These TATs reflect the time-frames as already laid down in the IRDA Regulations for Protection of Policyholders Interests and more, as, wherever considered necessary (for certain service aspects not getting specifically reflected in the Regulations), specific TATs are indicated in the classification and mapping provided by the Authority.

As regards (ii) above, the minimum TATs required to be followed shall be as prescribed in guideline 4 (a) to (g) as prescribed above.

6. Closure of grievance: A complaint shall be considered as disposed of and closed when

a.   the company has acceded to the request of the complainant fully.

b.   where the complainant has indicated in writing, acceptance of the response of the insurer.

c.    where the complainant has not responded to the insurer within 8 weeks of the company’s written response.

d.   Where the Grievance Redressal Officer has certified that the company has discharged its contractual, statutory and regulatory obligations and therefore closes the complaint.

7. Categorisation of complaints:

a.   Categorisation of complaints as prescribed by the Authority from time to time shall be adopted by insurers and incorporated in their systems.

b.   The present classification prescribed by the Authority is placed at Annexure A. All insurers shall provide for these classification categories in their respective systems.

8. Minimum software requirements:

It is necessary for insurers to have automated systems that will enable online registration, tracking of status of grievances by complainants and periodical reports as prescribed by IRDA.

The system should also be one which can integrate seamlessly with the Authority’s system in the manner prescribed by the Authority. The Authority shall define these requirements from time to time and insurers shall ensure that they provide for such software/system modifications as may be required. The objective is to create the required industry level database and systems that would enable speedy and effective redressal of complaints.

9. Calls relating to grievances:

Insurers shall also have in place a system to receive and deal with all kinds of calls including voice/e-mail, relating to grievances, from prospects and policyholders. The system should enable and facilitate the required interfacing with IRDA’s system of handling calls/e-mails.

10. Publicizing Grievance Redressal Procedure:

Every insurer shall publicize its grievance redressal procedure and ensure that it is specifically made available on its website.

11. Policyholder Protection Committee:

Every insurer that ensure that the Policyholder Protection Committee, as stipulated in the guidelines for Corporate Governance issued by the Authority, is in place and is receiving and analyzing the required reports from the management and is carrying out all other requisite monitoring activities.

PROEDURE

Disputes do arises under the insurance policies either due to repudiation of claims or payment of claim amount not as per the claim bill filed. To resolve these issues, many options are available to the policyholders as under:

Complaint may be filed with the Insurer

1.   Integrated Grievance management System (IGMS)

2.   File a Complaint with Ombudsman

3.   File a legal case under Consumer protection Act 1986

1 . Complaint may be filed with the Insurer:

Approach the Grievance Redressal Officer of its branch or any other office that you deal with. Give your complaint in writing along with the necessary support documents Take a written acknowledgement of your complaint with the date. The insurance company should deal with your complaint within 15 days. If that does not happen or if you are unhappy with their solution you can: Approach the Grievance Redressal Cell of the Consumer Affairs Department of IRDA:

Call Toll Free Number 155255 (or) 1800 4254 732 or Send an e-mail to complaints@irda.gov.in

2. Integrated Grievance management System (IGMS)

Make use of the Integrated Grievance Management System

Register and monitor your complaint at igms.irda.gov.in or compliant form (Click here) may also be to IRDAI at Hyderabad TAT for resolving the complaints is 3 days to 6 months in life insurance and 3 days to 30 days in General Insurance.

3. File a Complaint with Ombudsman

Any individual (not any business entity) and claim amount not exceeding Rs 20 lakhs may file a complaint in the prescribed form an Insurance Ombudsman in the respective State of the Policyholder. For prescribed form (Click here). The decision of the Insurance Ombudsman is binding on the Insurer while the Policyholder has the option to file a complaint under Consumer Protection Act 1986. There is no fee to file a complaint application. The time limit of decision is 30 days from the date of filing the complaint. The legal Advisor is not permitted to present at the time of hearing.

4. File a legal case under Consumer protection Act 1986:

Any Individual or Business Entity can file a complaint with the following consumer courts:

District Forum for the claim amount up to Rs 20 lakhs State Commission for the claim amount more than Rs 20 lakhs but up to Rs 100 lakhs Though there is not Stamp duty to file a complaint but nominal amount of Court fees is to be deposited while filing a complaint.

The appeal can be filed with the Higher Commission for the decision of the District forum and after National Commission the appeal lies with the Hon’able Supreme Court. If one is unhappy with your insurance company

• Approach the Grievance Redressal Officer of its branch or any other office that you deal with. 
• Give your complaint in writing along with the necessary support documents
• Take a written acknowledgement of your complaint with the date.

The insurance company should deal with your complaint within 15 days.

The insurance company should deal with your complaint within 15 days.

• If that does not happen or if you are unhappy with their solution you can:
• Approach the Grievance Redressal Cell of the Consumer Affairs Department of IRDA:
• Call Toll Free Number 155255 (or) 1800 4254 732 or
• Send an e-mail to complaints@irda.gov.in
• Make use of the Integrated Grievance Management System:
• Register and monitor your complaint at igms.irda.gov.in
• Send a letter to IRDAI with your complaint:
• Click here to download Complaint Registration Form
• Fill and send the Complaint Registration Form along with any letter or enclosures, if felt necessary, by post or courier to:

The General Manager, Consumer Affairs Department - Grievance Redressal Cell,  Insurance Regulatory and Development Authority of India (IRDAI) 3-5-817/818, United India Towers, 9th Floor, Hyderguda, Basheerbagh,  Hyderabad – 500 029

The Framework 

IRDAI’s regulations stipulate the Turnaround Times (TAT) for various services that an insurance company has to render to the consumer.  These are part of the IRDA Protection of Policyholders’ Interests (PPHI) Regulations 2002.

Insurance companies are also required to have an effective Grievance Redressal Mechanism and IRDAI has created the guidelines for that too.

Here are the TATs for an insurance company to deal with various types of complaints

The Process 

 If insurance company does not resolve complaint to ones satisfaction you can escalate complaint to IRDAI. 

• If your complaint is suitable for taking to the Insurance Ombudsman IRDAI will help resolve it by taking it up with the insurance company
• For disputes where enquiry or adjudication are required should approach the Consumer Forum or Courts.

The Process 

Integrated Grievance Management System 

 IRDAI has launched the Integrated Grievance Management System (IGMS). Apart from creating a central repository of industry-wide insurance grievance data, IGMS is a grievance redress monitoring tool for IRDAI. Policyholders who have grievances should register their complaints with the Grievance Redress Channel of the Insurance Company first. If policyholders are not able to access the insurance company directly for any reason, IGMS provides a gateway to register complaints with insurance companies.

 Complaints shall be registered with insurance companies first and only if need be, be escalated them to IRDAI (Consumer Affairs Department). IGMS is a comprehensive solution which not only has the ability to provide a centralised and online access to the policyholder but complete access and control to IRDAI for monitoring market conduct issues of which policyholder grievances are the main indicators. IGMS has the ability to classify different complaint types based on pre-defined rules. The system has the ability to assign, store and track unique complaint IDs. It also sends intimations to various stakeholders as required, within the workflow. The system has defined target Turnaround Times (TATs) and measures the actual TATs on all complaints. IGMS sets up alerts for pending tasks nearing the laid down Turnaround Time. The system automatically triggers activities at the appropriate time through rule based workflows.

 A complaint registered through IGMS will flow to the insurer's system as well as the IRDAI repository. Updating of status will be mirrored in the IRDAI system. IGMS enables generation of reports on all criteria like ageing, status, nature of complaint and any other parameter that is defined.

 Thus IGMS provides a standard platform to all insurers to resolve policyholder grievances and provides IRDAI with a tool to monitor the effectiveness of the grievance redress system of insurers.

Insurance Ombudsman 

 The Insurance Ombudsman scheme was created by Government of India for individual policyholders to have their complaints settled out of the courts system in a cost-effective, efficient and impartial way.

 There are 17 Insurance Ombudsman in different locations and you can approach the one having jurisdiction over the location of the insurance company office that you have a complaint against.

You can approach the Ombudsman with complaint if:

• You have first approached your insurance company with the complaint and
• They have not resolved it
• Not resolved it to your satisfaction or
• Not responded to it at all for 30 days
• Your complaint pertains to any policy you have taken in your capacity as an individual and
• The value of the claim including expenses claimed is not above Rs 30 lakh

Your complaint to the Ombudsman can be about:

• Any partial or total repudiation of claims by an insurer
• Any dispute about premium paid or payable in terms of the policy
• Any dispute on the legal construction of the policies as far as it relates to claims
• Delay in settlement of claims
• Non-issue of any insurance document to you after you pay your premium

The settlement process Recommendation:

 The Ombudsman will act as counselor and mediator and 

• Arrive at a fair recommendation based on the facts of the dispute
• If you accept this as a full and final settlement, the Ombudsman will
• Inform the company which should comply with the terms in 15 days

Awards

• If a settlement by recommendation does not work, the Ombudsman will:
• Pass an award within 3 months of receiving the complaint and which will be
• A speaking award with the detailed reasoning
• Binding on the insurance company but
• Not binding on the policyholder
• The Ombudsman can also award an ex-gratia payment

Once the Award is passed

• The Insurer shall comply with the award within 30 days of the receipt of award and intimate the compliance of the same to the Ombudsman.

The Consumer Protection Act, 1986:

This Act was passed “to provide for better protection of the interest of consumers and to make provision for the establishment of consumer councils and other authorities for the settlement of consumer’s disputes”. The Act has been amended by the Consumer Protection (Amendment) Act, 2002.

Consumer Disputes Redressal Agencies: “Consumer disputes redressal agencies” are established in each district and state and at national level.

     i.        District Forum

             o     The forum has jurisdiction to entertain complaints, where value of the goods or services and the compensation claimed is up to Rs.20 lakhs.

             o     The District Forum is empowered to send its order/decree for execution to appropriate civil court.

    ii.        State Commission

             o     This redressal authority has original, appellate and supervisory jurisdiction.

             o     It entertains appeals from the District Forum.

             o     It also has original jurisdiction to entertain complaints where the value of goods/service and compensation, if any claimed exceeds Rs. 20 lakhs but does not exceed Rs. 100 lakhs.

             o     Other powers and authority are similar to those of the District Forum.

   iii.        National Commission

             o     The final authority established under the Act is the National Commission.

             o     It has original, appellate as well as supervisory jurisdiction.

             o     It can hear the appeals from the order passed by the State

             o     Commission and in its original jurisdiction it will entertain disputes, where goods/services and the compensation claimed exceeds Rs.100 lakhs.

             o     It has supervisory jurisdiction over State Commission.

             o     All the three agencies have powers of a civil court.

Protection of Policyholders’ Interest Regulations, 2002:

Protection of Policyholders’ Interest Regulations, 2002 states following points:

Grievance redressal procedure

Every insurer shall have in place proper procedures and effective mechanism to address complaints and grievances of policyholders efficiently and with speed and the same along-with the information in respect of Insurance Ombudsman shall be communicated to the policyholder along-with the policy document and as maybe found necessary.

Matters to be stated in life insurance policy

1.   A life insurance policy shall clearly state:

a.   The name of the plan governing the policy, its terms and conditions;

b.   Whether it is participating in profits or not;

c.    The basis of participation in profits such as cash bonus, deferred bonus, simple or compound reversionary bonus;

d.   The benefits payable and the contingencies upon which these are payable and the other terms and conditions of the insurance contract;

e.   The details of the riders attaching to the main policy;

f.     The date of commencement of risk and the date of maturity or date(s) on which the benefits are payable;

g.   The premiums payable, periodicity of payment, grace period allowed for payment of the premium, the date the last installment of premium, the implication of discontinuing the payment of an installment(s) of premium and also the provisions of a guaranteed surrender value. (h) The age at entry and whether the same has been admitted;

h.   The policy requirements for (a) conversion of the policy into paid up policy, (b) surrender (c) non-forfeiture and (d) revival of lapsed policies;

i.     Contingencies excluded from the scope of the cover, both in respect of the main policy and the riders;

j.     The provisions for nomination, assignment, and loans on security of the policy and a statement that the rate of interest payable on such loan amount shall be as prescribed by the insurer at the time of taking the loan;

k.    Any special clauses or conditions, such as, first pregnancy clause, suicide clause etc.; and

l.     The address of the insurer to which all communications in respect of the policy shall be sent.

m.  The documents that are normally required to be submitted by a claimant in support of a claim under the policy.

2.   While acting under regulation 6(1) in forwarding the policy to the insured, the insurer shall inform by the letter forwarding the policy that he has a period of 15 days from the date of receipt of the policy document to review the terms and conditions of the policy and where the insured disagrees to any of those terms or conditions, he has the option to return the policy stating the reasons for his objection, when he shall be entitled to a refund of the premium paid, subject only to a deduction of a proportionate risk premium for the period on cover and the expenses incurred by the insurer on medical examination of the proposer and stamp duty charges.

3.   In respect of a unit linked policy, in addition to the deductions under sub-regulation (2) of this regulation, the insurer shall also be entitled to repurchase the unit at the price of the units on the date of cancellation.

4.   In respect of a cover, where premium charged is dependent on age, the insurer shall ensure that the age is admitted as far as possible before issuance of the policy document. In case where age has not been admitted by the time the policy is issued, the insurer shall make efforts to obtain proof of age and admit the same as soon as possible.

Matters to be stated in general insurance policy

1.   A general insurance policy shall clearly state:

a.   The name(s) and address (es) of the insured and of any bank(s) or any other person having financial interest in the subject matter of insurance;

b.   Full description of the property or interest insured;

c.    The location or locations of the property or interest insured under the policy and, where appropriate, with respective insured values;

d.   Period of Insurance;

e.   Sums insured;

f.     Perils covered and not covered;

g.   Any franchise or deductible applicable;

h.   Premium payable and where the premium is provisional subject to adjustment, the basis of adjustment of premium be stated;

i.     Policy terms, conditions and warranties;

j.     Action to be taken by the insured upon occurrence of a contingency likely to give rise to a claim under the policy;

k.    The obligations of the insured in relation to the subject matter of insurance upon occurrence of an event giving rise to a claim and the rights of the insurer in the circumstances;

l.     Any special conditions attaching to the policy;

m.  provision for cancellation of the policy on grounds of mis-representation, fraud, non-disclosure of material facts or non-cooperation of the insured;

n.   the address of the insurer to which all communications in respect of the insurance contract should be sent;

o.   the details of the riders attaching to the main policy;

p.   Proforma of any communication the insurer may seek from the policyholders to service the policy.

2.   Every insurer shall inform and keep informed periodically the insured on the requirements to be fulfilled by the insured regarding lodging of a claim arising in terms of the policy and the procedures to be followed by him to enable the insurer to settle a claim early.

Claims procedure in respect of a life insurance policy

1.   A life insurance policy shall ­state the primary documents which are normally required to be submitted by a claimant in support of a claim.

2.   A life insurance company, upon receiving a claim, shall process the claim without delay. Any queries or requirement of additional documents, to the extent possible, shall be raised all at once and not in a piece-meal manner, within a period of 15 days of the receipt of the claim.

3.   A claim under a life policy shall be paid or be disputed giving all the relevant reasons, within 30 days from the date of receipt of all relevant papers and clarifications required. However, where the circumstances of a claim warrant an investigation in the opinion of the insurance company, it shall initiate and complete such investigation at the earliest. Where in the opinion of the insurance company the circumstances of a claim warrant an investigation, it shall initiate and complete such investigation at the earliest, in any case not later than 6 months from the time of lodging the claim.

4.   Subject to the provisions of section 47 of the Act, where a claim is ready for payment but the payment cannot be made due to any reasons of a proper identification of the payee, the life insurer shall hold the amount for the benefit of the payee and such an amount shall earn interest at the rate applicable to a savings bank account with a scheduled bank (effective from 30 days following the submission of all papers and information).

5.   Where there is a delay on the part of the insurer in processing a claim for a reason other than the one covered by sub-regulation (4), the life insurance company shall pay interest on the claim amount at a rate which is 2% above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it.

Claim procedure in respect of a general insurance policy

1.   An insured or the claimant shall give notice to the insurer of any loss arising under contract of insurance at the earliest or within such extended time as may be allowed by the insurer. On receipt of such a communication, a general insurer shall respond immediately and give clear indication to the insured on the procedures that he should follow. In cases where a surveyor has to be appointed for assessing a loss/ claim, it shall be so done within 72 hours of the receipt of intimation from the insured.

2.   Where the insured is unable to furnish all the particulars required by the surveyor or where the surveyor does not receive the full cooperation of the insured, the insurer or the surveyor as the case may be, shall inform in writing the insured about the delay that may result in the assessment of the claim. The surveyor shall be subjected to the code of conduct laid down by the Authority while assessing the loss, and shall communicate his findings to the insurer within 30 days of his appointment with a copy of the report being furnished to the insured, if he so desires. Where, in special circumstances of the case, either due to its special and complicated nature, the surveyor shall under intimation to the insured, seek an extension from the insurer for submission of his report. In no case shall a surveyor take more than six months from the date of his appointment to furnish his report.

3.   If an insurer, on the receipt of a survey report, finds that it is incomplete in any respect, he shall require the surveyor under intimation to the insured, to furnish an additional report on certain specific issues as may be required by the insurer. Such a request may be made by the insurer within 15 days of the receipt of the original survey report. Provided that the facility of calling for an additional report by the insurer shall not be resorted to more than once in the case of a claim.

4.   The surveyor on receipt of this communication shall furnish an additional report within three weeks of the date of receipt of communication from the insurer.

5.   On receipt of the survey report or the additional survey report, as the case may be, an insurer shall within a period of 30 days offer a settlement of the claim to the insured. If the insurer, for any reasons to be recorded in writing and communicated to the insured, decides to reject a claim under the policy, it shall do so within a period of 30 days from the receipt of the survey report or the additional survey report, as the case may be.

6.   Upon acceptance of an offer of settlement as stated in sub-regulation (5) by the insured, the payment of the amount due shall be made within 7 days from the date of acceptance of the offer by the insured. In the cases of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2% above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it.

Policyholders’ Servicing

1.   An insurer carrying on life or general business, as the case may be, shall at all times, respond within 10 days of the receipt of any communication from its policyholders in all matters, such as:

a.   Recording change of address;

b.   Noting a new nomination or change of nomination under a policy;

c.    Noting an assignment on the policy;

d.   Providing information on the current status of a policy indicating matters, such as, accrued bonus, surrender value and entitlement to a loan;

e.   Processing papers and disbursal of a loan on security of policy;

f.     Issuance of duplicate policy;

g.   Issuance of an endorsement under the policy; noting a change of interest or sum assured or perils insured, financial interest of a bank and other interests; and

h.   Guidance on the procedure for registering a claim and early settlement thereof.

General

1.   The requirements of disclosure of “material information” regarding a proposal or policy apply, under these regulations, both to the insurer and the insured.

2.   The policyholder shall assist the insurer, if the latter so requires, in the prosecution of a proceeding or in the matter of recovery of claims which the insurer has against third parties.

3.   The policyholder shall furnish all information that is sought from him by the insurer and also any other information which the insurer considers as having a bearing on the risk to enable the latter to assess properly the risk sought to be covered by a policy.

4.   Any breaches of the obligations cast on an insurer or insurance agent or insurance intermediary in terms of these regulations may enable the Authority to initiate action against each or all of them, jointly or severally, under the Act and/or the Insurance Regulatory and Development Authority Act, 1999.

Anti Money Laundering (AML):

Background:

1.1      The Prevention of Money Laundering Act (PMLA), 2002 (the Act) brought into force with effect from 1st July 2005, is applicable to all the financial institutions which include Life Insurers. The application of anti-money laundering measures to non-depository financial institutions generally, and to the Life Insurers in particular, has also been emphasized by international regulatory agencies as a key element in combating money laundering. Establishment of anti money laundering programs by financial institutions is one of the central recommendations of the Financial Action Task Force and also forms part of the Insurance Core Principles of the International Association of Insurance Supervisors (IAIS). Accordingly, the Authority decided to put in place the following regulatory guidelines/instructions to the Life Insurers and Agents as part of the programme on Anti Money Laundering/Counter-Financing of Terrorism (AML/CFT) for the insurance sector.  

1.2      Life Insurers offer a variety of products aimed at transferring the financial risk of a certain event from the insured to the Life Insurer. These products include life insurance contracts, annuity contracts, and health insurance contracts. These products are offered to the public through trained agents of the Life Insurers and also through a number of alternate distribution channels like direct marketing, bancassurance, etc. The guidelines are therefore of importance to the agents also, to the extent indicated herein.  

1.3      The obligation to establish an anti-money laundering program applies to a Life Insurer. They have the responsibility for guarding against insurance products being used to launder unlawfully derived funds or to finance terrorist acts.   

2.   What is Money Laundering?

2.1      Money Laundering is moving illegally acquired cash through financial systems so that it appears to be legally acquired.  

2.2      There are three common stages of money laundering as detailed below which are resorted to by the launderers and Life Insurers which may unwittingly get exposed to a potential criminal activity while undertaking normal business transactions:  

Placement -

the physical disposal of cash proceeds derived from illegal activity; 

Layering -

separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the source of money, subvert the audit trail and provide anonymity; and 

Integration -

creating the impression of apparent legitimacy to criminally derived wealth.

2.3      If the layering process has succeeded, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing to be normal business funds. Financial institutions such as Life Insurers are therefore placed with a statutory duty to make a disclosure to the authorized officer when knowing or suspecting that any property, in whole or in part, directly or indirectly, representing the proceeds of a predicated offence, or was or is intended to be used in that connection is passing through the Life Insurer. Such disclosures are protected by law, enabling the person with information to be able to disclose the same without any fear. Life Insurers likewise need not fear breach of their duty of confidentiality owed to customers.  

3.   AML/CFT Program

In order to discharge the statutory responsibility to detect possible attempts of money laundering or financing of terrorism, every Life Insurer needs to have an AML/CFT program which should, at a minimum, include:

3.1 Internal policies, procedures, and controls;

3.2 Appointment of a Principal compliance officer and a designated director;

3.3 Recruitment and training of employees/agents;

3.4 Internal Control/Audit; 

The above key elements of the AML/CFT programme are discussed in detail below:

3.1 Internal policies, procedures and controls:

Each Life Insurer has to establish and implement policies, procedures and internal controls which would also integrate its agents in its AML/CFT program, as detailed below:

3.1.1 Know Your Customer (KYC) Norms

     i.        Considering the potential threat of usage of the financial services by a money launderer, Life Insurer should make reasonable efforts to determine the true identity of all customers requesting for its services especially the person who funds/pays for an insurance contract, either as beneficial owner or otherwise. For the purposes of these norms, the term customer also refers to the proposer/policyholder; beneficiaries and assignee. Where a client is a juridical person, verification of identity is required to be carried out on persons purporting to act and is authorized to act on behalf of a client.

    ii.        Effective procedures should be put in place to obtain requisite details for proper identification of new customers. Special care has to be exercised to ensure that the contracts are not under anonymous or fictitious names.

   iii.         Life Insurer to take steps to identify the beneficial owner and take all reasonable measures to verify his/her identity to their satisfaction so as to establish the beneficial ownership. Procedures for determination of Beneficial Ownership are prescribed at Annexure I       (‘Beneficial owner’ for this purpose means ‘an individual who ultimately owns the insurance policy or controls a customer of the Life Insurer or the person on whose behalf a transaction is being conducted and includes a person who exercises ultimate effective control over a juridical person.)

  iv.        A list of officially valid documents to be verified at the time of accepting the risk for compliance with KYC requirement for individuals and others is given in Annexure II.   No further documentation is necessary for proof of residence where the document of identity submitted also gives the proof of residence.   It is mandatory to obtain any one of the documents to clearly establish the customer identity in respect of all new insurance contracts. Recent photograph shall be collected in case of individual customers in relation to individual policy.  

    v.        In case of small value policy holders and for spread of insurance into rural and low income sectors, especially micro-insurance, the KYC requirement may be relaxed for a total annual premium of Rs. 10,000/- on life insurance policies held by a single individual from the requirement of recent photograph and proof of residence.

  vi.        Documents collected towards the identity and address of the customer should be duly certified by an authorized person as identified by the Life Insurer. In cases where e-KYC services of the Unique Identification Authority of India (UIDAI) are availed for KYC verification (which is acceptable subject to specific and express consent of the customer to access his/her data through UIDAI system), certification requirements under this clause shall be deemed to be complied with. The e-KYC should be based on biometric (finger/iris) authentication as the primary mode with One Time Password (OTP) based authentication as a second factor.

 vii.        While implementing the KYC norms on juridical persons, Life Insurers will have to identify and verify their legal status through various documents (indicated, but not limited to, at Annexure II of this guidelines), to be collected in support of

             o     The name, legal form, proof of existence,

             o     Powers that regulate and bind the juridical persons,

             o     Address of the registered office/ main place of business Systems/processes laid down to meet this requirement may be based on risk perception of the entity (e.g., in case of a public limited company verification and identification of shareholders of that company is not called for)

viii.        Customer information should be collected from all relevant sources, including from agents.

  ix.        At any point in time during the contract period, where Life Insurer is no longer satisfied about the true identity of the customer, a Suspicious Transaction Report (STR) should be filed with Financial Intelligence Unit-India (FIU-IND).

3.1.2 Reliance on third party KYC:

For the purposes of KYC norms under clause 3.1.1, while Life Insurer is ultimately responsible for customer due diligence and undertaking enhanced due diligence measures, as applicable, Life Insurer may rely on a third party even if it is within the same financial group, subject to the conditions that-

     i.        the Life Insurer immediately obtains necessary information of customer due diligence carried out by the third party;

    ii.        the Life Insurer takes adequate steps to satisfy itself that copies of identification data and other relevant documentation relating to the customer due diligence requirements will be made available from the third party upon request without delay;

   iii.        the Life Insurer is satisfied that such third party is regulated, supervised or monitored for, and has measures in place for compliance with customer due diligence and record-keeping requirements in line with the requirements and obligations under the Act;  

  iv.        the third party is not based in a country or jurisdiction assessed as high risk;

    v.        the Life Insurer is ultimately responsible for client due diligence and undertaking enhanced due diligence, if required;

3.1.3 Enhanced Due Diligence (EDD):

     i.        Life Insurers should examine, as far as reasonably possible, the background and purpose of all complex, unusually large transactions, and all unusual patterns of transactions, which have no apparent economic or lawful purpose. Where the risks of money laundering or terrorist financing are higher, Life Insurers should be required to conduct enhanced due diligence measures, consistent with the risks identified. In particular, they should increase the degree and nature of monitoring of the business relationship, in order to determine whether those transactions or activities appear unusual or suspicious.

    ii.        Conducting enhanced due diligence should not be limited to merely documenting income proofs. It would mean having measures and procedures which are more rigorous and robust than normal KYC. These measures should be commensurate to the risk. While it is not intended to be exhaustive, the following are some of the reasonable measures in carrying out enhanced due diligence:

• More frequent review of the customers’ profile/transactions
• Application of additional measures like gathering information from publicly available sources or otherwise
• Review of the proposal/contract by a senior official of the Life Insurer.
• Reasonable measures to know the customer’s source of funds commensurate with the assessed risk of customer and product profile which may include:
• conducting independent enquiries on the details collected on /provided by the customer where required,
• consulting a credible database, public or other, etc.,

Measures so laid down should be such that it would satisfy competent authorities (regulatory/enforcement authorities), if need be at a future date, that due diligence was in fact observed by the Life Insurer in compliance with the guidelines and the PML Act, based on the assessed risk involved in a transaction/contract.

3.1.4 Simplified Due Diligence:

Life Insurers may apply ‘simplified measures’ in the case of ‘Low risk’ customers taking into consideration the type of customer, business relationship, nature and value of transactions based on the overall money laundering and terrorist financing risks involved.   Simplified Client Due Diligence measures are not acceptable whenever there is a suspicion of money laundering or terrorist financing, or where specific higher-risk scenarios apply.

3.1.5 Implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967 (UAPA)

     i.        The Life Insurers should not enter into a contract with a customer whose identity matches with any person in the sanction list or with banned entities and those reported to have links with terrorists or terrorist organizations.

    ii.        A list of individuals and entities subject to UN sanction measures under UNSC Resolutions (hereinafter referred to as ‘designated individuals/entities’) would be circulated to the Life Insurers through Life Insurance Council, on receipt of the same from the Ministry of External Affairs (MEA).   This is in addition to the list of banned entities compiled by Ministry of Home Affairs (MHA) that have been circulated to the Life Insurers till date. Life Insurers shall periodically check MHA website for updated list of banned entities.  

   iii.        Life Insurers shall maintain an updated list of designated individuals/entities in electronic form and run a check on the given parameters on a regular basis to verify whether designated individuals/ entities are holding any insurance policies with the Life Insurer. An updated list of individuals and entities which are subject to various sanction measures as approved by Security Council Committee established pursuant to UNSC 1267 can be accessed from the United Nations website at http://www.un.org/sc/committees/1267/consolist.shtml

  iv.        By virtue of Section 51A of the Unlawful Activities (Prevention) Act, 1967 ( UAPA), the Central Government is empowered to freeze, seize or attach funds of and/or prevent entry into or transit through India any individual or entities that are suspected to be engaged in terrorism. [The list is accessible at website http://www.mha.nic.in/BO]. To implement the said section an order reference F. No. 17015/10/2002-IS-VI dated 27th August, 2009 has been issued by the Government of India. The salient aspects of the order with particular reference to insurance sector are provided at Annexure III.

    v.        Shri A. Venkateswara Rao, Joint Director,  Sectoral Development Department, Insurance Regulatory and Development Authority of India, 3rd Floor, Parishram Bhavan, Bashir Bagh, Hyderabad-500 004; E-mail: avrao@irda.gov.in; Telephone: 040 23381227; Fax: 040 6682 3334 is the UAPA Nodal Officer for the purposes of implementation of the said order in the insurance sector.

  vi.        A consolidated list of all the UAPA Nodal Officers of various agencies governed by the order will be circulated every year and on every change in the list, on receipt of the same from the Ministry of Home Affairs.

3.1.6 Contracts emanating from countries identified as deficient in AML/CFT regime:

     i.        Life Insurers are required to conduct enhanced due diligence while taking insurance risk exposure to individuals/entities connected with countries identified by FATF as having deficiencies in their AML/CFT regime.

    ii.        Special attention should be paid to business relationships and transactions, especially those which do not have apparent economic or visible lawful purpose. In all such cases, the background and purpose of such transactions will as far as possible, have to be examined and written findings maintained for assisting competent authorities. Agents will have to be appropriately alerted to ensure compliance with this stipulation.

   iii.        While using the FATF Public Statements, being circulated through the Life Insurance Council, Life Insurers should go beyond the FATF statements and consider publicly available information when identifying countries which do not or insufficiently apply the FATF Recommendations.

  iv.        Similar measures shall be applied on countries considered as high risk from terrorist financing or money laundering perspective based on prior experiences, transaction history or other factors (e.g., legal considerations, or allegations of official corruption).

3.1.7 When should KYC be done?

     i.        Knowing New Customers:

                   a.        In case of new contracts, KYC shall be done before the issue of every new insurance contract. Life Insurers may rely on the identification and verification steps that they have already undertaken in case of a customer, unless they have doubts about the veracity of the information with them.

                   b.        In case of non face to face business which includes Tele calling, Internet Marketing, payment of premiums/lump sums at branches, collection of documentation shall be completed within 15 days of issue of policy.

    ii.         Knowing Existing Customers:

Since Life Insurers, invariably collect considerable background information of the policyholder as also the beneficiary before entering into contracts no major constraints are expected in this exercise, in respect of the existing contracts. The AML/CFT requirements have been made effective for the existing customers (those who became customers effective from 1st January 2006).  

   iii.        KYC on On-going basis:

Besides verification of identity of the customer at the time of initial issuance of contract, KYC should also be carried out at the claim payout stage and at times when additional top up remittances are inconsistent with the customer’s known profile. Any change which is inconsistent with the normal and expected activity of the customer should attract the attention of the Life Insurers for further ongoing KYC processes and action as considered necessary.

3.1.8 Risk Assessment

Life Insurer shall carry out risk assessment to identify, assess and take effective measures to mitigate its money laundering and terrorist financing risk, severally and together, for customers, countries or geographic areas, and products, services, transactions or delivery channels that are consistent with the national risk assessment duly notified by the Central Government (to be informed by IRDAI soon after such notification).

The risk assessment shall be documented and be kept up-to-date. The Life Insurer shall consider all the relevant risk factors before determining the level of overall risk and the appropriate level and type of mitigation to be applied. It shall be made available to competent authorities and self-regulating bodies, as and when required.   In the context of the very large base of insurance customers and the significant differences in the extent of risk posed by them, as part of the risk assessment, the Life Insurers shall at a minimum, classify the customer into high risk and low risk, based on the individual’s profile and product profile, to decide upon the extent of due diligence.

     i.        For the purpose of risk categorization, individuals (other than High Net Worth) and entities whose identities and sources of wealth can be easily identified and transactions in whose accounts by and large conform to the known profile may be categorized as low risk. Illustrative examples of low risk customers could be salaried employees whose salary structures are well defined, people belonging to lower economic strata of the society, government departments and government owned companies, regulators and statutory bodies. In such cases, the policy may require that only the basic requirements of verifying the identity and location of the customer are to be met. Notwithstanding the above, in case of continuing policies, if the situation warrants, as for example if the customer profile is inconsistent with his investment through top-ups, a re-look on customer profile is to be carried out.

    ii.        For the high risk profiles, like for customers who are non-residents, high net worth individuals, trusts, charities, NGO’s and organizations receiving donations, companies having close family shareholding or beneficial ownership, firms with sleeping partners, politically exposed persons (PEPs), and those with dubious reputation as per available public information who need higher due diligence, KYC and underwriting procedures should ensure higher verification and counter checks. 

   iii.        For the purposes of risk categorization, term life insurance contracts may be considered as low risk products, unless the details indicate otherwise.

3.1.9 Contracts with Politically Exposed Persons (PEPs)

     i.        Life Insurers shall devise procedure to ensure that proposals for contracts with high risk customers are concluded after approval of senior management officials. It is however, emphasized that proposals of Politically Exposed Persons (PEPs)(as specified in the AML/CFT Master Circular issued by Reserve Bank of India from time to time) in particular requires approval of senior management, not below the level of Head (underwriting) /Chief Risk Officer.

    ii.        Life Insurers are directed to lay down appropriate on-going risk management procedures for identifying and applying enhanced due diligence measures to PEPs, customers who are close relatives of PEPs. These measures are also to be applied to insurance contracts of which a PEP is the ultimate beneficial owner.

   iii.        If the on-going risk management procedures indicate that the customer or beneficial owner is found to be, or subsequently becomes a PEP, Life Insurers shall inform the senior management on this business relationship and apply enhanced due diligence measures on such relationship. 

3.1.10 New Business Practices/Developments:

     i.         Life Insurers shall pay special attention to money laundering threats that may arise from

             o     Development of new products

             o     New business practices including new delivery mechanisms

             o     Use of new or developing technologies for both new and pre-existing products.

    ii.        Special attention should especially, be paid to the ‘non-face-to-face’ business relationships brought into effect through these methods.

   iii.        Life Insurers should lay down systems to prevent the misuse in money laundering framework. Safeguards will have to be built to manage typical risks associated in these methods like the following:

             o     Ease of access to the facility;

             o     Speed of electronic transactions;

             o      Ease of making multiple fictitious applications without incurring extra cost or the risk of detection;

             o     Absence of physical documents; etc.

  iv.        The extent of verification in respect of such ‘non face-to-face’ customers will depend on the risk profile of the product and that of the customer.

    v.        Life Insurers shall have in place procedures to manage specific increased risks associated with such relationships e.g. verification of details of the customer through on-site visits.

3.1.11 Products to be covered: 

The AML/CFT requirements focus on the vulnerability of the products offered by the Life Insurers to any of the processes of money laundering. Examples of vulnerable features/products are illustrated in AnnexureIV. Based on the vulnerability criterion and after examining the product and business coverage it has been decided that the following categories of products/business lines may be exempted from the purview of AML/CFT requirements:

     i.        Reinsurance and retrocession contracts where the treaties are between Life Insurers for reallocation of risks within the insurance industry and do not involve transactions with customers. 

    ii.        Group insurance businesses which are typically issued to a company, financial institution, or association and generally restrict the ability of an individual insured or participant to manipulate its investment

Life Insurers shall carry out risk assessment of various products before deciding on the extent of due diligence measures to be applied in each case.

3.1.12 Verification at the time of redemption/surrender:

     i.        In life insurance business, no payments should be allowed to third parties except as provided in the contract or in cases like superannuation/gratuity accumulations and payments to legal heirs in case of death benefits. 

                   a.        Suspicious activity monitoring program should be appropriate to the company and the products it sells. Special attention should be paid to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. Background of such transactions, including all documents /office records /memorandums pertaining to such transactions, as far as possible, should be examined by the Principal Compliance Officer for recording his findings. These records are required to be preserved for five years as indicated in clause 3.1.14. An illustrative list of such transactions is provided in AnnexureV.

                   b.        Life Insurers should report the suspicious transactions within 7 working days on being satisfied that the transaction is suspicious. Such reports shall include attempted transactions, whether or not made in cash. 

                    c.        Life Insurers shall lay down proper mechanisms to check any kind of attempts to avoid disclosure of PAN details. In case of possible attempts to circumvent the requirements, the same shall be reviewed from the angle of suspicious activities and shall be reported to FIU-IND, if required.  

                   d.        Directors, officers and employees (permanent and temporary) of Life Insurers shall be prohibited from disclosing to anybody, the fact that a Suspicious Transactions Report or related information of a policyholder/prospect is being reported or provided to the FIU-IND.

    ii.        Free look cancellations need particular attention of the Life Insurer especially in cases of client indulging in free look cancellation on more than one occasion.

   iii.        AML/CFT checks become more important in case the policy has been assigned by the policyholder to a third party not related to him (except where the assignment is to Banks/FIs/Capital Market intermediaries regulated by IRDAI/RBI/SEBI). Notwithstanding the above, Life Insurers are required to ensure that no vulnerable cases go undetected. Especially where there is suspicion of money laundering or terrorist financing, or where there are factors to indicate a higher risk, AML/CFT checks will have to be carried out on such assignments and STR should be filed with FIU-IND, if necessary (Refer to 3.1.13 below).

3.1.13 Reporting Obligations:

The AML/CFT program envisages submission of Reports on certain transactions to Financial Intelligence Unit-India (FIU-IND) set up by the Government of India to coordinate and strengthen collection and sharing of financial intelligence through effective national, regional and global network to combat money laundering and related crimes. FIU-IND is the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions. Every Life Insurer shall evolve an internal mechanism, for detecting the transactions referred to in the following paras for furnishing information about such transactions in the formats that may be accessed at the FIU-IND Website at http://fiuindia.gov.in.

     i.        Suspicious Transactions Report (STR):

                   a.        Suspicious activity monitoring program should be appropriate to the company and the products it sells. Special attention should be paid to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. Background of such transactions, including all documents /office records /memorandums pertaining to such transactions, as far as possible, should be examined by the Principal Compliance Officer for recording his findings. These records are required to be preserved for five years as indicated in clause 3.1.14. An illustrative list of such transactions is provided in AnnexureV.

                   b.        Life Insurers should report the suspicious transactions within 7 working days on being satisfied that the transaction is suspicious. Such reports shall include attempted transactions, whether or not made in cash. 

                    c.        Life Insurers shall lay down proper mechanisms to check any kind of attempts to avoid disclosure of PAN details. In case of possible attempts to circumvent the requirements, the same shall be reviewed from the angle of suspicious activities and shall be reported to FIU-IND, if required.

                   d.        Directors, officers and employees (permanent and temporary) of Life Insurers shall be prohibited from disclosing to anybody, the fact that a Suspicious Transactions Report or related information of a policyholder/prospect is being reported or provided to the FIU-IND.

    ii.        Monitoring and Reporting of Cash Transactions: Remittance of premium is an important stage of entering into contract; hence, cash transactions need more diligence and care.

                   a.        With a view to ensuring that premiums are paid out of clearly identifiable sources of funds, it has been decided to permit premium/proposal deposits remittances in cash beyond Rs. 50,000/- per transaction subject to the customer quoting PAN. Life Insurers shall verify the authenticity of the details of PAN so obtained. In case of customers not required to have PAN or with only agricultural income, Form 60/61 prescribed under the provisions of Income Tax Rules shall be obtained.

                   b.        All cash transactions of the value of more than Rs. 10,00,000/- or its equivalent in foreign currency; all series of cash transactions integrally connected to each other which have been individually valued below Rs. 10,00,000/-  or its equivalent in foreign currency where such series of transactions have taken place within a calendar month and the monthly aggregate exceeds an amount of Rs. 10,00,000/-  or its equivalent in foreign currency shall be reported to FIU-IND by the 15th of the succeeding month

                    c.        The above clauses should not be selectively interpreted on individual transaction basis.  Splitting of the insurance policies/issue of number of policies to one or more entities facilitating individuals to defeat the spirit of the AML/CFT guidelines should be avoided.

   iii.        Reporting of receipts by Non-Profit Organizations: All transactions, involving receipts by non-profit organizations (either in the form of assignments and/or in the form of top-up remittances) of value more than Rs. 10,00,000/- or its equivalent in foreign currency, should be reported to FIU-IND by the 15th day of the succeeding month.

  iv.        Reporting of Counterfeit Currency/Forged Bank notes (CCR): All cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security or a document has taken place facilitating the transactions, should be reported to FIU-IND by the 15th day of succeeding month.

3.1.14 Record Keeping

     i.        The Life Insurer, its designated director, officers and employees are required to maintain the information/records of types of transactions mentioned under Rule 3 and 4 of PML Rules 2005 as well as those relating to the verification of identity of clients for a period of five years.  The records referred to in the said Rule 3 shall be maintained for a period of five years from the date of transaction.  Records pertaining to all other transactions, (for which Life Insurers are obliged to maintain records under other applicable Legislations/Regulations/Rules) Life Insurers are directed to retain records as provided in the said Legislation/Regulations/Rules but not less than for a period of five years from the date of end of the business relationship with the customer.

    ii.        Records can be maintained in electronic form and/or physical form. In cases where services offered by a third party service providers are utilized,  

                   a.        Life Insurer shall be satisfied about the organizational capabilities, and that technology, systems and measures are in place to safeguard the privacy of the data maintained and to prevent unauthorized access, alteration, destruction, disclosure or dissemination of records and data

                   b.        The physical or electronic access to the premises, facilities, automatic data processing systems, data storage sites and facilities including back-up sites and facilities and to the electronic data communication network of the service provider is controlled, monitored and recorded;

                    c.        The service provider has established standard transmission and encryption formats and non-repudiation safeguards for electronic communication of data.

   iii.        Life Insurer should implement specific procedures for retaining internal records of transactions both domestic or international, to enable them to comply swiftly with information requests from the competent authorities. Such records must be sufficient to permit reconstruction of individual transactions (including the amounts and types of currency involved (if any) so as to provide, if necessary, evidence for prosecution of criminal activity. Life Insurers should retain the records of those contracts, which have been settled by claim (maturity or death), surrender or cancellation, for a period of at least five years after that settlement.

  iv.        In situations, where the records relate to ongoing investigations, or transactions which have been the subject of a disclosure, they should be retained until it is confirmed that the case has been closed where practicable, Life Insurers are required to seek and retain relevant identification documents for all such transactions and to report such transactions of suspicious funds.

    v.        In case of customer identification data obtained through the customer due diligence process, account files and business correspondence should be retained for at least five years after the business relationship is ended.

3.1.15 Sharing of Information:

Sharing of information on customers may be permitted between organizations such as Income tax authorities, Law Enforcement authorities and such other authorities as required under law or by the order of court.

3.2 Compliance Arrangements:

3.2.1 A detailed AML/CFT Policy should be drawn up encompassing aspects of Customer acceptance policy, Customer Identification procedure, Monitoring of transactions, Risk management framework as evolved by the Life Insurer. The policy should have the approval of the board and should be reviewed annually and changes effected based on experience.  

3.2.2 Responsibility on behalf of the agents:

The guidelines place the responsibility of a robust AML/CFT program on the Life Insurers. Nonetheless, it is necessary that the following steps are taken to strengthen the level of control on the agents engaged by the Life Insurers:  

a.    The list of rules and regulations covering performance of agents must be put in place. A clause should be added making KYC norms mandatory and specific process document can be included as part of the contracts.

b.   Services of defaulting agents who expose the Life Insurers to AML/CFT related risks on multiple occasions should be terminated and the details reported to IRDAI for further action.

3.2.3 Appointment of a Designated Director and a Principal Compliance Officer:

a.   Appointment:

     i.        A “Designated Director” (as defined under the PML Rules 2015 as amended from time to time) to ensure overall implementation of the obligations imposed under chapter IV of the Act and the Rules shall be appointed.

    ii.        A Principal Compliance Officer (PCO) at a senior level and preferably not below the level of Head (Audit/Compliance)/Chief Risk Officer shall be appointed to ensure compliance with the obligations imposed under chapter IV of the Act and the Rules.

   iii.        The contact details of the designated director and the principal compliance officer for AML/CFT guidelines shall be communicated to IRDAI and FIU-IND within 7 (seven) days .

3.3 Recruitment and Training of employees/agents:

     i.        As most part of the insurance business is through agents who bring in ‘non face to face’ business relationships with the policyholders, the selection process of agents should be monitored carefully. The committee monitoring the agents should monitor sales practices followed by agents and ensure that if any unfair practice is being reported, then action is taken after due investigation. Periodic risk management reviews should be conducted to ensure Life Insurer's strict adherence to laid down process and strong ethical and control environment. The concept of AML/CFT should be part of in-house training curriculum for agents.

    ii.        Life Insurersshould have adequate screening procedures when hiring employees.

   iii.        Instruction manuals on the procedures for selling insurance products, customer identification, record-keeping, acceptance and processing of insurance proposals, issue of insurance policies should be set out.

  iv.        The following training requirements are considered essential based on the class of employees:

a.   New employees: A general appreciation of the background to money laundering, and the subsequent need for identifying and reporting of any suspicious transactions to the appropriate designated point should be provided to all new employees who will be dealing with customers or their transactions, irrespective of the level of seniority.

b.   Sales/Advisory staff: Members of staff who are dealing directly with the public (whether as members of staff or agents) are the first point of contact with potential money launderers and their efforts are therefore vital to the strategy in the fight against money laundering. It is vital that “front-line” staff is made aware of the Life Insurer’s policy for dealing with non-regular customers particularly where large transactions are involved, and the need for extra vigilance in these cases.

c.    Processing staff: Those members of staff who receive completed proposals and cheques for payment of the premium contribution must receive appropriate training in the processing and verification procedures.

d.   Administration/Operations supervisors and managers: A higher level of instruction covering all aspects of money laundering procedures should be provided to those responsible for supervising or managing staff.

e.   Ongoing training: It will also be necessary to make arrangements for refresher training at regular intervals to ensure that agents/ /staff are duly updated on their responsibilities. Timing and content of training packages for various levels of agents/ /staff will need to be adapted by individual Life Insurers for their own needs.

f.     Records of training imparted to agents//staff in the various categories detailed above shall be maintained.

3.4 Internal Control/Audit:

Life Insurers internal audit/inspection departments should verify on a regular basis, compliance with policies, procedures and controls relating to money laundering activities. The reports should specifically comment on the robustness of the internal policies and processes in this regard and make constructive suggestions where necessary, to strengthen the policy and implementation aspects.  

Do’s and Don’ts for POS Person:

Do's for POS Person

a.   Identify himself and the insurer/ intermediary whom he represents

b.   Show the appointment letter to the prospect on demand;

c.    Disseminate the requisite information in respect of insurance products offered for sale by his insurer/ intermediary and take into account the needs of the prospect while recommending a specific insurance plan;

d.   Where the POSP represents more than one insurer offering same line of products, he should dispassionately advice the policyholder on the products of all Insurers whom he is representing and the product best suited to the specific needs of the prospect;

e.   Disclose the scales of commission in respect of the insurance product offered for sale, if asked by the prospect;

f.     Indicate the premium to be charged by the insurer for the insurance product offered for sale;

g.   Explain to the prospect the nature of information required in the proposal form by the insurer, and also the importance of disclosure of material information in the purchase of an insurance contract;

h.   Bring to the notice of the insurer every fact about the prospect relevant to insurance underwriting, including any adverse habits or income inconsistency of the prospect, within his knowledge in his Report to the insurer/intermediary, and any material fact that may adversely affect the underwriting decision of the insurer as regards acceptance of the proposal, by making all reasonable enquiries about the prospect;

i.     Obtain the requisite documents at the time of filing the proposal form with the insurer; and other documents subsequently asked for by the insurer for completion of the proposal;

j.     Advise every prospect to effect nomination under the policy

k.    Inform promptly the prospect about the acceptance or rejection of the proposal by the insurer;

l.     Render necessary assistance and advice to every policyholder introduced through him/her on all policy servicing matters including assignment of policy, change of address or exercise of options under the policy or any other policy service, wherever necessary;

m.  Render necessary assistance to the policy claimants or beneficiaries in complying with the requirements for settlement of claims by the insurer;

Don'ts for POS Person:

a.   POSP has to conduct business with utmost good faith and integrity, with due care and diligence.

b.   Identify him the license if a prospect demands it.

c.    He has to provide information about insurance products, on sale. While advising the prospect to purchase a specific insurance policy, he has to take into account needs of the prospect.

d.   He has to keep information given by the prospect, confidential.

e.   He has to disclose the commission he earns, if asked by prospect.

f.     He has to indicate premium that will be charged. holder policyholders or himself and show keep all

g.   He has to explain the prospect the information and other details, and its importance that will be required for insurance / intermediary.

h.   He has to inform insurance company / intermediary about any adverse health conditions, personal habits or income inconsistencies of their prospect in a confidential report, along with every proposal.

i.     He has to inform the consequences of non-disclosure and inaccuracies to prospect.

j.     He has to communicate promptly to prospect about acceptance / rejection of a proposal.

k.    He has to advice policyholder to effect nomination or assignment or change of address or exercise of option, as the case may be, and provide necessary assistance in these matters.

l.     He has to provide assistance to the policyholders/ claimants / beneficiaries in submitting requirements for the settlement of claims to the insurance company / intermediary.

m.  He has to forward the information received from the policyholder regarding claim or any event likely to cause claim, without delay.

n.   He has to communicate the insurance company / intermediary decision regarding claim to the claimant without delay.

o.   He has to provide all reasonable assistance to claimant in pursuing the claim.

p.   He has to ensure compliance of

o    Section 64-VB of Insurance Act, 1938

o    Section 41 of the Insurance Act, 1938 by the drawing attention of the prospect

o    Anti Money Laundering [AML] and Know Your Customer [KYC] guidelines