Grounds for Insurance Web Aggregator License Cancellation

Ashish M. Shaji

10 Mar, 2022

An insurance web aggregator license is mandatory for an entity to offer the services of insurance web aggregator. Without having this license, nobody can commence the business of insurance web aggregator. In order to get this license, an applicant entity must go through the complete process, including meeting the registration requirements, documentation, filing application etc. Once the license is granted, the entity can function as Insurance Web Aggregator seamlessly however, if such entity fails to comply with the regulations or violates/breaches any rules or regulation specified by the regulatory authority, its license will be liable to be cancelled. In this article, we will discuss about Insurance Web Aggregator License Cancellation.

Who are Insurance Web Aggregators?

Insurance web aggregators are insurance intermediaries who maintain a website to provide interface to the insurance prospects for price comparison and information of products of different insurers. Insurance web aggregators compile and provide information on insurance policies provided by different companies on a website.

Insurance Web Aggregator License Cancellation

The regulatory authority can cancel the insurance web aggregator license if the Insurance Web Aggregator doesn’t exercise due diligence or fails to comply with any of the obligations under the Insurance Web Aggregators Regulations or Act contrary to the provisions of the Act, IRDA Act of 1999, the rules & regulations made thereunder and any other directions issued by the Authority from time to time. However, such action can only be taken after granting an opportunity of being heard to the insurance web aggregator.

When can the license be cancelled?

The cancellation of insurance web aggregator license can take place after providing a due notice or even without providing a notice to the insurance web aggregator in default.

The insurance web aggregator license can be cancelled after providing a notice and after providing a reasonable opportunity of being heard if-

• The insurance web aggregator breaches the provisions of the Insurance Act of 1938, IRDA Act 1999^[1] or rules made thereunder;
• The insurance web aggregator doesn’t act as per the obligations of insurance web aggregators as specified under Form V of Schedule VIII;
• The insurance web aggregator fails to comply with the code of conduct prescribed for insurance web aggregators;
• The insurance web aggregator provides any information that is false or conceals material facts in the application submitted for obtaining the license;
• The insurance web aggregator fails to provide information on its activities as Insurance Web Aggregator when asked by the authority or where it furnishes false information or fails to disclose material facts to the authority;
• The insurance web aggregator fails to  submit periodical returns;
• The insurance web aggregator doesn’t co-operate with the authority;
• The insurance web aggregator fails to solve the complaints of policyholders;
• The insurance web aggregator doesn’t pay the fee as required under the regulations for insurance web aggregators or penalties imposed on it;
• The insurance web aggregator doesn’t comply with the capital and net worth requirements;
• The insurance web aggregator engages in sourcing of business by themselves or through call centres;
• The insurance web aggregator are guilty of misconduct or contravenes the conduct as specified in the insurance web aggregator’s code of conduct.

 Apart from the above mentioned cases, the license of insurance web aggregator can also be cancelled if the insurance regulatory authority believes that the establishment of the insurance web aggregator is to divert fund within a group of companies or its associates.

So the above were the cases where the regulatory authority can cancel the license only after giving a due notice, but there are certain cases where the authority can cancel the license granted to an insurance web aggregator without providing notice. Such cases are as follows:

• If the insurance web aggregator is found guilty of fraud or is convicted of a criminal offence;
• If the insurance web aggregator is guilty of a default that requires immediate action in the authority’s opinion. However, in such cases, the authority may be required to provide the reasons for cancellation in writing;
• If the insurance web aggregator fails to commence the business within 6 months of grant of license.

What to do if the License has been cancelled?

An insurance web aggregator can apply afresh for insurance web aggregator license in case where its license was cancelled. However, this can be done only after the period of 12 months from the date of cancellation of license. Moreover, if the decision of the authority was upheld by a court, then the application for registration shall be considered after 12 months period from the date of the order of the court.

Further, the application for obtaining fresh registration by the applicant whose license was previously cancelled by the authority shall be accepted only after completion of the due diligence involving one or more of the following:

• Gravity of previous regulatory breach;
• LMS model and its infrastructure set up;
• Persistency of business over the years;
• Complaints against the insurance web aggregator;
• Due diligence and track record of present business.

Takeaway

In a nutshell, insurance web aggregators need to be aware of their roles and responsibilities and they should run their insurance business in accordance to the regulations laid down by the insurance regulatory authority. If insurance web aggregators fail to maintain the code of conduct as required from them, then it can lead to insurance web aggregator license cancellation. Having said that, those whose license is cancelled can still apply for fresh registration after 12 months period.

Read our Article:Process for Insurance Web Aggregator License Renewal