In order to streamline distribution of insurance products and ensure efficient services to policyholders, a panel constituted by insurance regulator Irdai has recommended that individuals be allowed to shift from being insurance agents to insurance service providers (ISP). The panel has also recommended that the list of products to be sold through an insurance marketing firm (IMF) should be expanded to include group insurance products and combi-products. If the recommendations are accepted, then an insurance agent, who at present is attached with only one company, can sell products of other firms in life, general and even health insurance.
On remuneration, the panel suggests that the structure be kept same across life, general and health insurers. “The remuneration regulations already provide not more than 30% of commission or remuneration paid to insurance agents and insurance intermediaries for general insurance, including health insurance. Therefore, the remuneration model must be arrived at keeping in mind the expenses of management limit and any change in the structure should not lead to unhealthy competition in the sector,” the report of the 10-member committee notes.
Experts say the regulators’ report on IMF will help policyholders as they will get professional advice for the long-term, increase the penetration of insurance which depends on the availability of insurance products and services and widespread insurance distribution channels. “It is important that the IMF as a distribution channel is nurtured in a manner that the objective of increasing insurance penetration through an area-wise registration approach is achieved,” says the report.
The recommendations will also enable insurance companies and IMFs to compete more effectively and respond with innovation and flexibility to customers’ needs and protect consumers’ interest.
Interchangeability of ISPs
At present, it is difficult to convince any individual agent who is an eligible candidate to be a principal officer (PO) or ISP of an IMF because he has to surrender his individual agency licence which will result in him losing his renewal commission as per the present practice of the insurance companies. Also, ISPs and PO get fixed remuneration whereas the individual agent does not get fixed remuneration.
The panel recommends that interchangeability from ISP to PO and agent may be allowed. For migration from an agent to PO or ISP, it has recommended that continuation of renewal commission/benefits post-surrender of the individual agency may be as per the board approved policy of insurance companies. It also recommends that the current mandate of payment of minimum salary, not lower than Rs 5,000 per month, should be continued. Currently, any change in arrangement with the insurance companies is done only with prior approval of Irdai. It has recommended that any change in tie-ups with insurance companies may be governed as per the contractual terms of the IMF agreement between the insurer and IMFs and Irdai has to be informed with the reasons for change in arrangement.
Till the year 2000, insurance marketing was predominantly done by agency. However, the distribution structure has changed with brokers, corporate agents, bancassurance partners playing an important role in distribution of life, non-life and health insurance products. Also, new channels like online distribution, web aggregation, point of sales person and IMF were introduced to provide impetus to insurance distribution. In fact, digital technology can help insurance companies to underwrite risk effectively by using Big Data collected from multiple sources and the regulator has set up a working group to examine innovations in insurance involving wearable/portable devices.