Individual agents can sell multiple insurance policies once they surrender their existing agency license and clear the broker exam.
In a move to increase insurance penetration, IRDA has proposed the introduction of Insurance Marketing Firm (IMF) through which distributors can sell multiple insurance products of life and non-life insurance companies providing a wider choice to investors. Through this channel, the distributors can also sell other financial products like mutual funds and pension products.
Earlier, a committee headed by a former chairman of LIC, NM Govardhan had recommended IRDA to develop IMF in order to increase penetration of insurance in the country. In January IRDA had set up a working group with five members each from life and non-life insurance companies and IRDA member to explore the possibility of developing IMF.
In a draft circular, Randip Singh Jagpal, Senior Joint Director, IRDA said that the working group has submitted its report after brainstorming sessions held in Mumbai, Chennai, Bengaluru and Kolkata.
Structure: The structure of IMF involves
- principal officer who will be the executive head and responsible for regulatory compliance and administrative work,
- insurance sales person for solicitation of insurance policies and
- financial service executive for carrying out advisory and sales of other financial products like mutual funds and pension products of PFRDA.
Net worth: IRDA has said that the IMF should maintain a net worth Rs. 10 lakh for floating its distribution business. Initially, the license will be issued for three years which can be renewed 90 days prior to expiry.
Remuneration: Apart from commission from sale of insurance policies, IMF can charge a fee for other expenses like expenses incurred on marketing & infrastructure and performance based incentives. The regulator has clarified that the fee for carrying out these facilities should be based on mutual agreement between insurers and IMF. However, it could not exceed 50% of the limit of expenses of management ceiling, said IRDA. Cafemutual was the first to report that IMF may charge for expenses incurred on marketing and infrastructure. Click here to read the earlier story on IMF.
Why IMF, if insurance broking model has a multiple tie-up model: As of now, the insurance broking model allows multiple tie-ups with insurance companies. However, many brokers don’t prefer to sell life insurance to retail customers as it entails heavy marketing expenses. Instead, they focus on selling large ticket non-life products like group health insurance, motor insurance, liability insurance etc. to corporates. Also, both agency and broking regulation do not allow distribution channels to recover marketing expenses from insurers.
Can an insurance agent migrate to Insurance Marketing Firm to sell multiple policies: IRDA has clarified that insurance agents are not eligible to join IMF. However, if an individual agent surrenders his/her agency license and acquire broking license by qualifying broker exam, he/she can join IMF and become Insurance Sales Person (ISP) to sell multiple insurance policies. The remuneration of ISP would be based on salary as well as commission.
Initially, IMF should be allowed to carry out their operations in only one district. However, the IMF can apply for more districts within a state after three years of operation.
IRDA has sought comments of all stakeholders by April 15, 2014.
