Insurance is traditionally considered to be a push product and hence the channels employed by the insurer to solicit business and concluding sales of the products becomes a matter of prime importance. Traditionally agency model has worked great for public sector life insurance companies like life insurance corporation of India and a major chunk of revenue and business of this giant public sector undertaking comes through the business done by individual agents.
But with passing time and with the market being relaxed for the entry of foreign players and the insurance sector getting matured slowly, the regulator IRDAI has permitted entry of multinational brokers, web aggregators, insurance marketing firms, corporate agents and a few other to increase the insurance penetration and density in a rapidly developing country like India where both these metrics is substantially lower than that of other matured insurance markets.
Undoubtedly, Insurance regulatory and development authority (IRDAI) has issued detailed guidelines and regulations governing training, licensing, operations, roles and responsibilities and all other possible aspects for all intermediaries permitted to solicit insurance business. Some of the major regulations enacted in this context are IRDAI insurance intermediaries’ regulations (amendment) 2019, IRDAI (Registration of Corporate Agents) Regulations etc. These regulation in addition to clarifying all possible aspects answer the question asked in the topic of the current article. We will discuss the question of the topic with few other relevant details regarding four of the major intermediaries one by one in this current article.
- Individual agents: Candidates willing to become an insurance agent needs to register with IRDAI and mandatorily pass the prescribed exam, attend stipulated hours of training and fulfil other eligibility criteria like educational qualification, age etc. and produce requisite documents to get the license. An Insurance Agent is not permitted to work for different Companies of same segment. Let’s take an example; an insurance agent cannot work for LIC and SBI Life Insurance company at same time as both the companies do Life Insurance business, same applies to General Insurance Company; an agent cannot work for NIA and UIIC at the same time. Insurance agent can solicit insurance business for sell of insurance products of one General Insurance Company, One Life Insurance Company and one Standalone Health Insurance Company.
- Corporate agents: This type of arrangement is primarily seen in motor insurance and the best examples are vehicle dealers who are corporate agents of the insurers. A corporate agent also needs to register with IRDAI after submission of required fee, fulfil mandatory capital requirements, complete training and get the apt license to start soliciting insurance business. As mandated by the regulator an insurance corporate agent may have arrangements with a maximum of three different life, three general and three health insurers separately to sell and service their insurance products of any line of business. The specified person can work with all the insurers the corporate agent has tie up but they need to have certificate for respective line of business. For instance, even though have the corporate agent has tie up with nine different insurers, three each from life, general and health but the specified person can work with life insurers only if he does not have certificate for life and health insurance.
- Insurance brokers: Insurance industry is now flooded with insurance brokers out of which some are large multinational ones and many are new small brokers recently obtained their licenses from IRDAI. Brokers obviously need to fulfil stricter eligibility criteria and higher capital requirements than corporate agents. A broker can work with multiple insurance companies as per their choice and need. Insurance brokers majorly solicit insurance for large and mid-sized corporate clients and design tailor made insurance programs for them which may be at times quite complex ones. The basic structure of working of an insurance broker is that they receive mandate from their clients for receiving quotes from insurers of the brokers choice and preference. The client may have invited two or more brokers for quotation purposes and may have allocated insurance companies to them as per their preference and choice. The brokers float the RFQ (client information document) as per allocated market and receive quotes from insurance companies with price, terms and conditions. The client then goes through all the quotes and award the contract to the broker and insurer combination he feels is the best as per price and coverages offered.
- Insurance marketing firms (IMF): IMF need to take a no objection certificate from the regulator after fulfilling the eligibility criteria, capital requirements and training. Then it is granted a permission to operate in the specific area of operation and solicit insurance business for specified products for retail and small and medium enterprises. The IMF can have tie up with maximum two life insurers, two general insurers and two health insurers at any point of time which should be intimated to the IRDAI. In other words, at a time an IMF can work with six different insurance companies as per the criteria mentioned above. In addition to two general insurers IMF is permitted to engage with agriculture insurance company of India limited (AIC) and export credit guarantee corporation limited (ACGC). There can obviously be a change in the engagement with insurers as per agreement between insurers and IMF but with apt arrangements for servicing of existing customers in case the IMF leaves one insurer and engages with someone else.