In a draft exposure, the regulator has sought to put in place prudent risk management practices on the usage of trade logos.
IRDA has issued an exposure draft on the use of trade logo in which it has advised the insurance companies to use a distinct logo in order to reduce cost and minimize the confusion in the minds of distributors as well as investors.
The insurance regulator has pointed out some major flaws in the use of trade logo by the insurance companies like usage of promoter’s logo without any legal agreement, unambiguous payment clause, etc.
IRDA said “Having no written agreement may be a matter of concern especially in the event of any reputational loss, as shareholders of respective promoter companies may prefer to have their own stand on the quantum of compensation to be sought, thereby, possibly jeopardizing the interests of the policyholders. Also, absence of specific consideration of amount may result in fleecing insurer’s expenses in the case of any unforeseen contingencies. In the event of exit of promoting partner, the costs of building the unique logo may be prohibitive;otherwise the exited partner may charge the insurer exorbitantly.”
Through the exposure draft, IRDA has suggested certain guidelines on the use of trade logo of promoter group:
· Where an insurer adopts the trade logo of any of its partners, there shall be a prominent declaration as to the fact of insurer being a separate entity giving the names of all joint venture partners. Further, it should state clearly that mere adoption of logo of promoter does not convey any inheritance of financial strength and quality of promoter in products and services of the insurer.
· Written agreement between the promoter and insurance companies should be in place with underlying terms and conditions. Such agreement should mention consideration amount leaving no scope of arbitrary payments
· When the consideration is premium, it should mention the percentage of premium with reasonable ceiling limit
· If there is no consideration, specific mention of this should be made in unambiguous terms
· Should have specific caveats on settlement of compensation
· Agreement must be signed for specific period
· Any payout towards compensation should be remitted from the shareholder’s account.
The insurance regulator has asked insurance companies to send their recommendations before September 30, 2013.