Sub broking expected to help insurers penetrate rural and semi-urban markets.
IRDA had formed a committee consisting of three members from non-life insurance, two members from life insurance, two members from IBAI and two members from IRDA to look into various issues in the sub-broking model.
According to the final report submitted by the committee, currently there are 343 licensed brokers existing in the industry, out of which 294 are direct brokers, 43 are composite brokers and 6 are reinsurance brokers. The committee’s data reflect that most of these brokers are in metros and big cities. “Therefore to spread the message of insurance, the committee feels that sub broking model will enable the brokers to spread to other areas which are not covered so far,” notes the report.
Drawing
a parallel from the agency channel of distribution, it said, a
sub-broker is an agent of the broker.
The committee also suggested
examination and syllabus for players in the retail broking system. It
also suggested that a sub broker should also receive 20 hours of
practical training from the main broker in addition to the mandatory
training of 50 hours.
If the sub broker garners premium of more than Rs 10 crore for two financial years, he has to upgrade his status as broker and cannot continue as sub broker, shared the report. The sub broker can place business worth Rs 1 lakh per policy. This threshold limit applies for both life and non-life business
Brokers having a certain degree of consistency and scale of revenues, geographical presence and IRDA licensed broking workforce can appoint sub brokers, the report added.
The panel suggested that the available infrastructure of Common Service Centers (CSC) in the rural areas may be utilized for procuring insurance business through sub broking model. The report also notes that the aim of sub-broking is customer-centric, i.e. giving the customer the opportunity to choose products from multiple insurers while augmenting insurance penetration.
IRDA has made the final report public for comments from shareholders and general public till 31st March.