IRDAI has issued a circular allowing insurance companies and intermediaries to sell insurance policies by floating e-commerce platform called Insurance Self-Network Platform (ISNP).
Sharing the rationale behind introducing e-commerce insurance distribution, IRDAI said that the promotion of e-commerce in insurance space would lower the transaction cost and bring higher efficiencies and greater reach. “E-commerce is seen as an effective medium to increase insurance penetration and enhance financial inclusion in a cost-effective manner,” said IRDAI.
Existing e-commerce giants like Amazon, Flipkart and Snapdeal can sell insurance policies on their platforms only after getting insurance broking license from IRDAI.
IRDAI has asked insurance companies and intermediaries to 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 their systems and processes 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. In fact, the insurance regulator has allowed ISNPs to offer discounts to customers. However, they are not allowed to offer cashbacks on 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.
Experts believe that the move will help distributors expand their footprint.
Kapil Mehta of Secure Now Insurance broker said that this move will help increase the insurance penetration in India. However, the regulator should clearly spell out the type of products to 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.”