Regulator IRDAI on Thursday proposed outsourcing norms for insurance companies under which they can take services of individuals for activities like medical examination, claim investigation, and recovery.

As per the exposure draft, every insurer should put in place a comprehensive board approved outsourcing policy.

In considering or renewing an outsourcing arrangement, an insurer should subject the agency to appropriate due diligence, Insurance Regulatory and Development Authority of India (Irdai) said in the proposed IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2016.

"The insurer shall satisfy itself that the outsourcing agency’s security policies, procedures and controls will enable the insurer to protect confidentiality and security of policyholder information," the draft said.

It also stresses that "core activities" like underwriting, product design, actuarial functions, reinsurance, policyholder grievances redressal, and compliance with AML, KYC Norms, should not be outsourced.

"Activities that support the Core Activity…may be outsourced at the discretion of the insurers and as per these Regulations. However, the execution of these services shall remain the core activity to be carried out by the insurers," the exposure draft said, on which comments have been invited till September 2.

Also, an insurer outsourcing any service to should put in place a contingency plan to ensure that the concerned activity as well as the overall business would not be disrupted as a result of unexpected shortfalls or failures, it added.