Digital-only insurers, microinsurers: SECP introduces new registration regime

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has introduced new registration regime for digital-only insurers and dedicated microinsurers.

The SECP officials informed the media Thursday that the new regime will promote digitalization and improve customer convenience through instant provision of services. In this regard, amendments to the Insurance Rules, 2017 have been notified vide SRO 1513(I)/2022.

The new framework is aimed at encouraging innovation, expanding product range, and promoting financial inclusion. The registration requirements have been designed to reduce barriers to entry, in terms of minimum paid up capital and solvency requirements. The minimum capital requirements have been set at Rs100 million for non-life digital-only business and Rs250 million for life digital-only business, whereas for non-life and life microinsurers, the capital requirements have been set at Rs80 million and Rs150 million, respectively.

The framework requires the digital-only insurer to develop digital claim lodgment and payment process since inception of operations, whilst demonstrating through implementation plan towards complete transition to digitalized claims processing comprising of claim intimation, claims assessment and payment.

The new framework does not prohibit existing insurance companies to underwrite microinsurance products or to distribute insurance through digital modes, under their existing setup.

Under the new regulations, the “digital-only insurer” means insurer as defined in the Ordinance having registration to carry on insurance business and primarily relies on technology for its insurance operations and makes distribution only through digital modes including outbound calls.

The life and non-life digital-only insurer may sell insurance to legal person for covering the risks of individuals associated with it such as in case of group life insurance or group health insurance or such similar cases where beneficiary of the insurance policy is natural person and not the legal person.

The maximum exposure of a digital-only insurer under a single policy issued by it shall be 5% of the shareholders’ equity of the digital-only insurer plus the related reinsurance available to it under the said policy.

The new regulations revealed that the digital-only insurer will ensure that the key facts relating to insurance policy such as risk insured, sum insured, policy benefits, premium, free look period, period of coverage and any other material fact, are communicated to the prospective policyholder while making the sales pitch before the offer to insurance contract is made.

The detailed terms and conditions may be communicated to the policyholder after issuance of insurance policy and the onus of such communication as stated in this sub-rule lies on digital-only insurer.

The digital-only insurer will provide evidence of insurance cover promptly after inception of insurance policy.

The digital-only insurer will obtain necessary information that forms part of proposal form and the beneficiary information including name, CNIC/ passport number or another national identity number and relationship of policyholder with the beneficiary. The insurer will disclose the risk of refusal of claim payment due to nondisclosure of medical or other material information in the proposal form.

The digital-only insurer will comply with the requirements of SEC (AML/ CFT) Regulations, 2020, and as amended from time to time, including but not limited to Customer Due Diligence (CDD), Enhanced Due Diligence (EDD) where applicable, ongoing transaction monitoring, filing of Suspicious Transactions Report (STR), screening of customer database against proscribed persons in accordance with TFS obligations under the United Nations (Security Council) Act 1948 and/or Anti-Terrorism Act 1997, as stated in the SEC (AML/CFT) Regulations, 2020.

All life and non-life insurance policies offered by digital-only insurer, except the group insurance policies, will be subject to free look period of at least 14 days starting from date of issuance of policy provided and where the policy is cancelled by the policyholder within the free look period, the premium will be refunded to the policyholder in the manner as stipulated in the rules, the SECP added.

Copyright Business Recorder, 2022