Customers are Cheering. Insurers are shocked. Media is thrilled.

This is what we call a makeover of the Insurance industry by IRDA. Today, IRDA is doing just what it should Supporting consumer confidence in the growing insurance industry.

IRDA recently imposed a penalty over Rs 1 crore (Rs. 1.47 crore) for unfairly rejecting 21 death settlement claims. The penalty was mainly because of unlawful denial of claims during the 90 days waiting period.

Clearly, what this means is that HDFC Standard Life has just not got its compliance risk management in order. The same issues appeared about a few years back impacting reputation and resulting in financial penalties. The Company should have addressed this by reviewing the claims process, ensuring that all compliance risk factors are properly monitored and addressed.

A comprehensive compliance risk management framework enables  organisations to address key compliance and regulatory guidelines in a way to eliminate compliance failures. The framework also aligns all top risk factors to the priorities so that top risks are addressed and constantly monitored.

Similar issues appear to be common in other insurance companies. Maybe, they believe that they can take customers for a ride. It is clear mathematics, denying death claims can save crores of Rupees, whereas a penalty will result in a small  fine. This is the thinking, I suppose of the insurance companies.

But what these companies don’t realise is the customers are reading these headlines. Insurance is on the minds of more than 50% of the urban population atleast once during the year (Thanks to the marketing/sales or Relationship Manger visits). If companies adopt such malpractices, then the customer is not likely to buy insurance from these companies even if they may be the cheapest in the market. Reputation risk is the foundation when the business model is heavily dependent upon consumers.

Riskpro urges these companies to address risk management weaknesses and proactively consider consumer confidence. Regulatory compliance, avoiding mis-selling and ethical sales practices should be their priority at all times. Riskpro can help such companies to address risk management weaknesses.

Other charges include excessive payments to HDFC Bank, HDFC securities and use of individuals and corporate which were not licensed  by IRDSA for solicitation or procuring insurance business. Many charges were let-off with or without warning after hearing the insurer side.

To learn more about how Riskpro can help improve risk management in insurance companies, please contact manoj.jain@riskpro.in