IRDAI has issued a circular in which it has clarified that all corporate agency license will lapse by March 2016 and directed corporate agents which include banks and NBFCs to obtain a fresh certificate of registration to distribute insurance policies. Further, these corporate agents are required to clarify whether they want to continue bancassurance model or follow multiple tie-up model.
In a notification, IRDAI said, “A corporate agent who has been issued a license prior to the commencement of these regulations has to obtain a fresh certificate of registration to work as a corporate agent with effect from April 1. Every corporate agent which is a company including banks, NBFC, LLP, NGOs has to file at the time of seeking registration with the regulator, a board approved policy on the manner of soliciting and servicing insurance products. ”
Earlier, the insurance regulator had made it mandatory for corporate agents - banks, NBFCs (corporate agents) to sell insurance policies of at least three life, three general and three standalone health insurers. However, IRDAI had later made it voluntary for banks to form such tie ups. That means, banks can take a decision at their discretion whether they want multiple tie-up model or continue to work under bancassurance model. The regulator has clarified that the changes have been proposed in the draft regulation on the basis of feedback received by market participants. In the draft circular, it said, “The corporate agents instead of having tie ups with a minimum of two insurers may now choose from one to a maximum of three insurers in any particular line of insurance business.”
Typically, many banks are corporate agents of their promoter group companies. Last year, IRDAI and RBI had allowed banks (corporate agents) to act as insurance brokers in order to increase insurance penetration in small cities and rural areas. However, it didn’t take off as many banks were reportedly unwilling to change their model due to stringent compliance.