In order to increase insurance penetration in rural India, IRDAI has introduced a new insurance distribution channel called Common Public Service Centres - Special Purpose Vehicle (CPSE-SPV).
CPSCs are the access points for delivery of essential public utility services, social welfare schemes, healthcare, financial, education and agriculture services, apart from host of B2C services to citizens in rural and remote areas of the country. With this, the insurance regulator would leverage the existing network of common public service centres to distribute insurance policies in rural areas.
The new channel will enable both life and non-life insurers to market some categories of retail insurance policies through CPSC-SPV network in the rural areas with the help of Rural Authorized Person (RAP) and Village Level Entrepreneur (VLE) who will act as insurance sales representative or insurance agents.
IRDAI has invited applications for issuance of license from existing CPSC-SPV with a processing fee of Rs 10,000. The insurance regulator said that the licenses would be valid for three years which can be renewed 30 days prior to the date of expiry. The service centres will also need to sign legal agreement with the insurance companies for the selling their products.
Here are some key features of the new distribution channel
- CPSC-SPV will have to appoint a principal officer for administrative and compliance; and RAPs and VLEs to solicit insurance policies
- While principal officer should be graduate, the minimum education criteria for RAPs and VLEs is matriculation
- Both RAPs and VLEs should complete 20 hours training from any recognized institute
- RAPs and VLEs can sell plain vanilla life products like term insurance and endowment plans having standardized features, general insurance, micro insurance social security policies and so on
- Along with commission (in line with insurance agents), CPSC-SPVs can provide post sales services like modification, cancellation, renewal and claims servicing of motor insurance policies for which they can charge a fee
- However, such intermediaries cannot get rewards from insurance companies
- CPSC-SPVs will have to compulsorily share at least 90% of the commission with RAPs or 85% with VLEs
- Insurers will have to follow a monthly settlement cycle to remunerate such CPSCs
