Allowing insurance agents to sell multiple insurance products will give a wider choice to investors.
A committee headed by N M Govardhan, Former Chairman of LIC, has recommended IRDA to allow insurance agents, corporate agents, direct channel etc. to have multiple tie-ups with insurance companies.
If this recommendation is accepted, insurance agents can sell schemes of multiple insurance companies which will give investors a wider choice.
Through a circular, IRDA said, “The committee had since submitted its report to the authority. One of the issues considered by the committee was to allow distribution companies to have multiple tie-ups with insurers, a model akin to Independent Financial Advisors (IFA).”
Anirudh Singh, Vice President - Business Strategy and Planning, Raheja QBE General Insurance believes that the move will increase insurance penetration and benefit customers by enabling them to choose best policies from a basket of insurance policies. “As of now, individual agents sell policies of only one insurance company restricting the choice for customers. Now customers have a wide variety of products to choose from”
Suresh Sadagopan of Ladder7 Financial Advisories seconds the view, “It’s a welcome move and will create a revolution in the distribution industry. Currently, due to single tie-up model, agents have to sell sometimes even a non-performing product of an insurance company. The move will encourage distributors to recommend the best products available in market based on performance, cost structure etc. to their clients reducing scope of wrong selling. Also, it will encourage insurance companies to compete and perform better like never before.”
However, some advisors have a different views, Ritesh Sheth of Tejas Consultancy says many insurance companies usually set internal targets of selling 15 policies in a year for their distributors. If IRDA allows multiple tie-ups, distributors will be expected to bring similar business for various insurers. Hence, he suggests initially the regulator should consider allowing tie-ups with only two life or general insurers to check the efficacy of this model.
Earlier in 2007, IRDA had constituted a committee to look into distribution channels - agency, corporate agency, direct sales etc. The insurance regulator had asked the committee to study and ascertain the manner in which these distribution channels have been functioning, their cost effectiveness, weaknesses etc. and make recommendations on the changes to be made to make them effective, professional and accountable and serve the interest of policyholders.
Last week, IRDA had called a meeting with representatives of life and non-life insurance companies to discuss the recommendation of committee.