The regulator has proposed to cap the commissions under traditional life insurance policies at 5% of the premium in the first year for Common Service Centres (CSCs).
IRDAI has come out with draft regulations in which it has included Common Service Centres (CSCs) under the purview of insurance intermediaries.
In September 2013, IRDAI had allowed insurance companies to use licensed Common Service Centres (CSCs) as a distribution network in rural areas in order to increase insurance penetration in the country. Typically, CSCs operate in rural areas where there is no access to internet. It provides services like e-governance, education, health, issuance of birth certificates, death certificates, utility payments etc. in remote locations. It works on public-private partnership (PPP) model and was established by the Department of Electronics and Information Technology through National e-Governance Plan (NeGP) in 2006.
However, the insurance regulator has proposed that CSCs should register with IRDAI as insurance intermediaries. IRDAI has invited applications for issuance of license from existing CSC-SPV with a processing fee of Rs 5,000. The insurance regulator said that the licenses will be valid for three years which can be renewed 30 days prior to the date of expiry.
CSCs will market insurance policies of both life and non-life insurers through special purpose vehicle (SPV) network with the help of Rural Authorized Person (RAP) who will act as insurance agents. RAPs must have minimum educational qualification of matriculation with basic computer knowledge. Also, they should complete 20 hours training from any recognized institute and pass the exam with at least 35% marks.
To use the services of CSCs, IRDAI has asked insurers to cough up Rs. 20 lakh as onboarding corpus. Insurers can pay this money in four installments. The money collected from insurers will be kept in an escrow account operated by Life Insurance Council.
Meanwhile, the regulator has proposed to cap the commission under traditional life insurance policies to 5% of the premium in the first year. However, IRDA has kept the commission at 15% under general insurance products. CSCs can also charge a fee for post sales service. The maximum sum assured under these products is proposed at Rs. 2 lakh.
The insurance regulator has invited feedback from stakeholders before April 21.