IRDAI has come out with an exposure draft on e-commerce distribution in which it has proposed to allow insurance companies and insurance intermediaries like brokers and agents to distribute insurance policies by floating e-commerce platform called Insurance Self-Network Platform (ISNP).
Existing e-commerce giants like Amazon, Flipkart and Snapdeal are not allowed to sell insurance policies on their platforms. However, they will be able to distribute such policies only after getting insurance broking license from IRDAI.
Also, IRDAI has proposed that insurance companies should register themselves under ISNP guidelines to sell insurance policies on their websites. “No person shall provide an insurance self-network platform for undertaking Insurance e-commerce activities in India unless he obtains permission from the Authority.”
Insurance companies and agents can apply for ISNP license with a non-refundable fee of Rs. 10,000. IRDAI will review the application form and examine system and process before granting ISNP license.
Policies sold through ISNPs are expected to be cheaper than regular policies. IRDAI said that insurers can decide pricing of policies sold through such platforms and offer differential pricing for the same product. Typically, the cost of acquisition of online policies is cheaper than offline policies.
The commission or remuneration of intermediaries would be same as that of traditional channels. “A product sold through the Insurance Self Network Platform shall be entitled to commission or remuneration as specified under the IRDAI (Payment of commission, remuneration or reward to insurance agents and insurance intermediaries) Regulations, 2016,” said IRDAI.
Industry experts feel that the move will help distributors expand their footprint. Gurpal S Dhingra, Director, Prudent Insurance Brokers said that intermediaries having robust systems and processes can grow their business by leveraging this platform. “If the proposal goes through, insurance intermediaries can reach out to masses through ISNPs.”
Kapil Mehta, Co-Founder, Secure Now Insurance Broker seconds the view and said that the move will help increase the insurance penetration in India. However, the regulator should clearly spell out the type of products which will be sold through this platform. “Insurance is not as simple as buying a garment or mobile phone. Most of the insurance policies are complicated and need advisor’s help. In my view, policies like term insurance, health insurance and motor insurance can be sold through such portals.”
IRDAI has sought comments of all stakeholders by June 20, 2016.
