Open architecture in the insurance distribution is gradually gaining some momentum after receiving a tepid response for many months. This is evident by the fact that 30 new players have received IRDAI license to float insurance marketing firms (IMFs) in just six months of the current financial year.
As a result, the total number of IMFs have increased to 44 as on September 2016. In March 2016, there were only 14 insurance marketing firms.
Interestingly, nearly 10 IMFs are from small cities like Mathura, Nagpur, Ernakulum, Mohali, Sonepat and Guntur. This could be due to awareness campaigns organized by the insurance regulator on IMF.
Last month, IRDAI Chairman T S Vijayan said at an industry event that insurance marketing firms (IMF) can help reduce mis-selling of insurance policies. Vijayan said that there were growing instances of mis-selling, particularly in the corporate agency model due to tied agency model. Insurance marketing firms could address this issue as it allows intermediaries to distribute insurance policies of multiple insurers. Going forward, we expect more traction in this distribution model, said Vijayan. He said IMF could be a game changer in the insurance distribution space.
Last year, in March, IRDAI had introduced a new distribution channel called IMF through which insurance distributors were allowed to tie up with multiple insurers to offer a wider choice to investors.
These firms are allowed to sell insurance policies of two life, two general and two standalone health insurers. In addition, agents can sell other financial products like mutual funds and pension products by floating an IMF, subject to respective regulatory approval. Existing insurance agents have to surrender their agency license and pass an IMF examination to get IMF license.
Distributors can submit their IMF applications online on imf.irda.gov.in.