IRDA/INT/ CIR/ MISP/246//11/2017 1^st November, 2017

Circular on Motor Insurance ServiceProvider (MISP)

Attention is drawn to circular no. IRDAI/INT/ GDL/ MISP/ 202/ 08/ 2017 dated 31^st August, 2017 on MISP. TheAuthority has received communication from various stakeholders seekingclarifications on some of the provisions of the MISP guidelines. In light ofthe queries raised the Authority issues the following clarifications on the provisionsof the MISP:

1.   Guideline 4(b) - Eligibilityconditions for appointment of MISP – Main Objects:

IRDAI’s response: It is clarifiedthat the Motor dealerships that are run asproprietorships or HUFs or other unincorporated entities and do not have anydeed or document to prove the objects, may furnish a declaration to thateffect.

2.   Guideline 5(a) & 5(g) – Appointment of MISP –Sponsoring Entity(ies)

IRDAI’s response: It is clarifiedthat the MISP can be sponsored by one or more insurer or one insuranceintermediary and not both.

3.   Guideline 5(e) – Appointment of MISP – MISPto maintain records for a period of at least 7 years from the date of InsurancePolicy etc

IRDAI’s response: It is clarifiedthat the MISP can maintain records either in physical or in electronic form.

4.   Guideline5 (f) – If an insurance intermediary appoints MISP, then it shall work for thenumber of insurers as allowed under the respective regulations governing theinsurance intermediary. Can an insurance intermediary create a panel ofinsurance companies for selling motor insurance policies?

IRDAI’s response:Aninsurance intermediary based on an objective and transparent criteria can enterinto service level agreements with general insurers for selling motor insurancepolicies.

5.   Guidelines 7( c) – Aadhaar based Identification

IRDAI’s response: The persons ofMISP involved in distributing motor insurance policies,living in North EasternStates and Jammu & Kashmir can be enrolled based on other KYC recognizeddocuments and upload the same on the IIB portal.

6.   Guidelines 9(a) & (b) – sponsoringentity is obligated to carry out a periodic review of controls, systems,procedures, and safeguards employed by the MISP - As MISP isallowed to work for one or more insurers/sponsoring entities hence do allinsurers/ sponsoring entities need to perform the periodic review of operationsof MISP?

IRDAI’s response: Every insurer shall undertakereview of operations of its part as well as common generic business aspectswiththe MISP in order to ensure that the MISP guidelines are followed in letter andspirit.

7.   Guideline 10( c) - MISP to issue Motor Insurance Policy on obtaining theexpress consent of the prospect.

IRDAI’s response: Consentcan be considered based on OTP sent to customers mobile. However declaration fromMISP as customer consent is not acceptable.

8.   Guideline 11(i) – Code of conduct of MISP – MISPshall not solicit motor insurance business from those persons who did not buythe automobile from it.

IRDAI’s response: It is clarifiedthat the MISP shall not canvassfor/solicit insurance policies bycalling up the customer who did not buy the vehicle from it. However if thecustomer chooses to go to a particular MISP for renewal of his motor insurancepolicy either on account of transfer from one city to another or due to sale ofthe automobile or due to closing of the motor dealership, the same ispermitted.

9.   Guideline 11(j) – Code of conduct of MISP – MISPshall not issue a motor insurance policy or motor insurance cover note thatcarries name or logo or any other symbol, except that of the insurer

IRDAI’s response: It is clarifiedthat the name and contact details of the insurance broker can appear on themotor insurance policy as per the size format decided by the general insurersthrough the General Insurance Council.

10.  Guideline 15(16) –Existing arrangements

IRDAI’s response: It is clarifiedthat MISP guideline is applicable for motor insurance only. The insuranceintermediaries that are granted certificate of registration by the Authoritycan sell other insurance products.

11.  Guideline 15(2)(a) –Disclosures

IRDAI’s response: It is clarifiedthat while the primary responsibility of ensuring policy wordings and featuresis of the insurer(s), the insurance intermediary and MISP are also responsiblefor compliance of the same.

Other clarifications

1.  If dealerwould need to identify unique designated person for each insurer if in case hedecides to go with multiple insurers.

IRDAI’s response: The samedesignated person can work for multiple insurers.

2.  If oneinsurer appoints MISP then does that MISP (DesignatedPerson) has to undergo training & examination again for other insurer.

IRDAI’s response: One training for the MISPperson is sufficient.

3.  Are OEM’sand financiers covered under these guidelines

IRDAI’s response: No, OEM’s andfinanciers are not covered under these guidelines. The MISP guidelines coverinsurers, insurance intermediaries and automobile dealers.

4.  Can ISPdistribute Motor Extended Warranty Product

IRDAI’s response:So long as theproduct is categorised as a motor insurance product, the MISP can sell thatproduct.

5.  What isthe procedure for making Designated person of MISP.
IRDAI’s response: the designated personof MISP will be identified by the MISP. He will undergo trainingand pass POS exam that will be conducted by the insurer or the insuranceintermediary as per guideline 7. He will then be nominated as the designatedperson by the MISPand recognised as DP by the insurer or the insuranceintermediary. The details of his Aadhaar number will be uploaded in the IIBportal by the insurer or the insurance intermediary in terms of guideline15(13).

6.  Whetherthe process of appointment of POSP will have to be completed by MISP?
IRDAI’s response: the process ofappointment will be completed by the insurer or the insurance intermediary asthe case may be as they are the sponsoring agency of the MISP.

7.  Weunderstand that appointment letter to POSP will be issued by designated personof MISP.Please confirm.

IRDAI’sresponse: Being a sponsoring entity the appointment letter to POS will beissued by the insurer or the insurance intermediary. 

8.   Whetherdata of POSP under MISP will have to be uploaded in POS database onIIB site and whether it will be uploaded by DP of MISP.Please confirm.
IRDAI’s response:  Yes, the POSdetails under MISP will be uploaded in the IIB portal. As perguideline 15(13) the same have to be uploaded by the insurer or the insuranceintermediary.

9.  What will be procedure for switching over of POSP from one MISP/intermediary tothe other?

IRDAI’sresponse: the switching over of the POS from one MISP/ intermediary to theother will follow the same procedure as laid down for POS / insurance agents.

10.  The Distribution Fee payable to MotorInsurance Service Provider (MISP) should be treated as ‘Commission~ or as~Expense~.

IRDAI’sresponse: The distribution fees is the amount paid to the MISP for procuringmotor insurance business. Therefore it may be treated as commission.

11.  Can the periodic review be performed by sendinga comprehensive checklist to MISP overe-mail and asking them to confirm compliance thereon along with relevantdocumentary evidence? Else this exercise may have huge cost implication goingby the number and spread of the dealers (MISP), even if itis outsourced.

IRDAI’sresponse: This is an operational issue. The insurer should ensure compliance ofthe guidelines in letter and spirit.

12.  Is itpossible for an MISP to act for more than One Intermediary(Broker)?

IRDAI’sresponse: No. The guidelines do not allow this.

13.  If thesame Auto Dealership Company is having two different Manufacturer Dealershipsis it possible for them (same MISP) to act for multiple Intermediaries?

IRDAI’sresponse: yes as the dealer is linked to the OEM.

14.  Is itPossible for the same  individual Designated person or  sameindividual POS can act for and on behalf of multiple intermediaries?

IRDAI’sresponse: No. The MISP person soliciting and procuring insurance business willbe attached to one intermediary.

15.  Is itpossible for the Dealership to maintain one same dedicated Bank account forreceiving Distribution Fees from Multiple Intermediaries?

IRDAI’sresponse: No. A Dealer can be an MISP for only one Insurance Intermediary.

P.J. Joseph

Member (Non-Life)