Sebi, Irdai, PFRDA Recommendations To Protect Customer Interests—A Regulatory Roundup

The government has introduced several regulatory changes to protect customers’ interests and ease of access to various financial products between May 21 and June 20. Government agencies like the Insurance and Regulatory Development Authority of India (Irdai), the Securities and Exchange Board of India (SEBI), and the Pension Fund Regulatory Development Authority (PFRDA) have brought several changes to ensure accountability, inclusion, fair competition, quick relief, ease of business, and customers’ protection in the financial markets.
Here we discuss the regulatory changes and how they will impact various stakeholders.  
Insurance
1. Change: To boost accountability and strengthen the insurance ombudsman system, Irdai has reconstituted the advisory committee that assists the ombudsman, to effectively address customer complaints and boost policyholders’ protection. 
Impact: The move is expected to help further strengthen the insurance ombudsman in resolving grievances and ensuring fair practices in the industry, while guaranteeing enhanced protection to policyholders. 
2. Change: The regulator has also issued directives to insurers to report cyber crimes within six hours of such incidences and file a compliance report in a prescribed format within 24 hours with the insurance regulator and the Indian Computer Emergency Reporting Team (Cert-In).
Impact: It is aimed at enhancing the existing cybersecurity measures and creating a more secure environment for the insurance sector, thereby enabling authorities to take necessary actions to mitigate risks and help protect policyholders’ interests.
For insurance penetration in the country, IRDAI has also issued guidelines for recruiting insurance volunteers across all geographies, including at the level of gram panchayats.

3. Change: IRDAI has issued draft guidelines to recruit “Bima Vahaks” or insurance volunteers in two categories: Corporate Bima Vahaks and Individual Bima Vahaks, as part of a promising initiative for insurance inclusion and awareness across India.

Impact: It is expected to enhance insurance inclusion and awareness in every corner of the country, where the insurance penetration may be still low. It will allow insurers to tailor-make their products based on the needs of all sections of the population.

4. Change: IRDAI has announced the “Bima Trinity” plan, an affordable bundled insurance product covering health, life, property, and accident in collaboration with general and life insurance firms, and a unified platform called “Bima Sugam” to integrate insurers and distributors to streamline the insurance process, creating a one-stop shop for customers and enabling and expediting claim settlements on a common industry platform. 

Impact: It will provide policyholders a comprehensive insurance policy, a faster claim settlement process, and value-added services like gym, yoga memberships, etc., thereby also helping address the country’s low insurance penetration. 

5. Change: IRDAI has also granted certificate of registration to Go Digit Life Insurance Ltd. to start life insurance business, thereby taking the total number of life insurers in the country to 26. 

Impact: This will boost competition in the life insurance sector and encourage insurance innovation to attract new customers.

For fast relief of Odisha train accident victims, IRDAI has issued guidelines to promptly process registration and insurance settlement claims.
6. Change: IRDAI has issued guidelines to general and health insurance companies to expedite the registration and insurance settlements of train accident victims in Odisha’s Balasore district.
Impact: It will help initiate immediate steps for the relief of victims by ensuring quick registration and disposal of claims.
7. Change: IRDAI has issued circulars to general insurers and standalone health insurance companies on insurance claims relating to cyclone Biparjoy in Gujarat.

Impact: It will help provide quick relief for damage to property and health of cyclone-affected people by ensuring quick disbursal of payments, not exceeding the stipulated timeline. 

8. Change: IRDAI has advised insurers to provide a facility to create a 14-digit Ayushman Bharat Health Account (ABHA) ID for policyholders in the proposal form. It has further advised the insurers to help proposers and the existing policyholders to create their ABHA numbers. 

Impact: This would help identify the insured in a digital ecosystem to facilitate seamless healthcare and insurance service delivery.

Capital Market 
In the capital market, Sebi has also introduced several changes to ensure investors’ protection and transparency in transactions.
8. Change: Sebi has barred online bond providers from offering unlisted debt securities, including those provided without a public offer or unregulated products and services by subsidiaries and other entities on their platforms, in a revised circular under rule 51A. 
Impact: It is expected to protect investors’ capital by reducing their exposure to unlisted securities or unregistered products and services by obscure subsidiaries and other entities that could potentially increase the risk of loss.
9. Change: Sebi has specified a mechanism to redress investors’ grievances in Chapter VII of its earlier circular for online bond platforms under Rule 55 (1) of the 2021 regulation concerning the Issue and Listing of Non-Convertible Securities.
Impact: It will help protect investors’ interest in securities and promote and regulate the securities market. It calls for the stock exchanges to inform the online bond platforms to disseminate the same on their websites while at the same time monitoring their operations. 

10. Change: Sebi has introduced several amendments to the guidelines on anti-money laundering (AML) standards and combating the financing of terrorism (CFT) obligations of the securities market intermediaries under the Prevention of Money-laundering Act, 2002.
Impact: The directives for the Sebi-registered intermediaries and the stock exchanges will help ensure better monitoring of terror-financing activities and remove the vulnerabilities in the securities market while providing a safe trading environment for the legitimate stakeholders.
11. Change: Sebi has provided a corrigendum to its earlier “Circular on participation of mutual funds in repo transactions on corporate debt securities”, allowing mutual funds to participate in repos in corporate bond securities. 
Impact: It will help protect investors’ interests in securities and ensure proper regulation and the development of the securities market.
12. Change: Sebi’s Mutual Funds Advisory Committee has prescribed a framework for the “execution only platforms” for transacting in direct plans of mutual fund schemes.
Impact: Since these platforms are often availed by investors who are not their clients as per Sebi rules, such a framework will give them a recourse or protection for the risks associated with such transactions, thereby striking a balance between investor convenience and investor protection.
Pension
For consumers’ ease of access to pension products, PFRDA has also introduced some changes.
13. Change: PFRDA has enabled the downloading and viewing of account statement for Tier I and Tier II NPS subscribers through DigiLocker.
Impact: NPS subscribers can now access and download their NPS statement on DigiLocker round-the-clock, providing them the ease of access and safe storage. 
14. Change: EPFO has outlined the calculation process for higher pension. Those who retired before September 1, 2014, the average pay of last 12 months in the job will be considered, and those who retired after that, the average salary of 60 months will be calculated.
Impact: Retirees whose pension amount is calculated based on their 60-month average salary may end up getting lower pension than those considered for 12 months. It is aimed at reducing the government of India’s fiscal burden.

Note: The list is not exhaustive.