Common Service Centres (CSCs), which have been proposed to act as insurance brokers to sell life and general insurance policies, will still take time to be adopted as a distribution channel by insurers. While the Insurance Regulatory and Development Authority (Irda) is soon coming up with guidelines on the usage of this channel, insurers are not in a rush to tie-up with them.
"There is a discussion on whether all 1,00,000 CSCs can be made brokers. However, the present set-up may not be able to handle a sudden surge in brokers. Further, there is no past examples of their service delivery model, which we can rely on," said the chief executive officer of a private life insurer.
At a time when the insurance regulator has placed huge emphasis over the Anti Money-Laundering (AML) norms, insurers are also concerned about using this channel since the CSCs would deal with cash. The chief distribution officer of a mid-size private life insurance company said that they have already expressed their opinion to Irda about dealing with CSCs on the back of tough AML norms.
CSC is a part of the National e-Governance Plan. The Centre’s plan is to roll out over 1,00,000 CSCs across the country with a focus on the rural areas. These CSCs are aimed at providing high quality and cost-effective video, voice and data content and services in the areas of e-governance, education, health, tele-medicine, entertainment and other private services. The CSCs will offer web-enabled e-governance services in rural areas. They can offer application forms, certificates, and utility payments such as electricity, telephone and water bills.
Though insurers agree that CSCs would be able to aid in deeper penetration of rural markets, they would only be selling simple products. A senior executive of a large private general insurance company said that the insurance companies will have to devise specialised products for this channel.
"Too complex or technical products may be difficult for the CSCs to understand since they are not a core part of the insurance system. However, we would then have to compromise on our innovative offerings since all companies will have to offer similar products through CSCs," the official added.
These CSCs will deliver services in the areas of telecom, agriculture, health, education, entertainment, consumer goods, banking and financial services (insurance), utility payments among others. Each CSC is expected to serve a cluster of six to seven villages, thereby covering more than 600,000 villages across India.
Industry sources said that CSCs will be authorised to sell life and non-life policies after its officials undergo the mandatory examination conducted by the Insurance Institute of India. Irda officials also confirmed that insurers, especially life insurance companies, are yet to take any concrete steps to enter into agreements with CSCs.
The public private partnership (PPP) model of the CSC scheme envisages a three-tier structure consisting of the CSC operator (village level entrepreneur), the service centre agency responsible for a division of 500-1,000 CSCs, and a state designated agency to implement the model in the state.
According to industry sources, CSCs will be authorised to sell life and non-life policies after its officials undergo the mandatory examination conducted by the Insurance Institute of India.
With other service requirements like birth and death certificates also proposed to be handled by these centres, there is also a worry about possible fraud in the system. The senior claims-servicing head of a bank-promoted life insurance company explained that there need to be systems in place to ensure that the same officials handling death certificates also do not handle life insurance claims.
"All life insurance death claims require a doctor-certified death certificate. Since CSCs will also be handling these documents, we have to be careful about any conflict of interest or malpractices that could crop up," the executive added.
Though Irda is expected to come out with detailed guidelines on the CSC distribution model within the next one to two months, there is lack of clarity on whether all insurance companies will be expected to tie-up with all CSCs. The general manager of a public general insurance company also added that making it mandatory to tie-up with all the centres across India will increase documentation and also make the process strenuous.
Areas of dispute in CSC model
-Will handle cash from other transactions. Anti Money-Laundering Norms to be more stringent for them
-Birth and death certificates also issued by CSCs. Conflict of interest and malpractices could crop up during servicing death claims in life insurance
-About 1,00,000 CSCs in India. Insurers not sure about whether to tie-up with all of them; against tying-up mandatorily with all
-Service quality is a concern. Since insurers can't set up physical branches, monitoring of CSC standards will be difficult
-CSCs could be either be a servicing channel or brokers. System cannot handle 1,00,000 CSCs as insurance brokers
"There is a discussion on whether all 1,00,000 CSCs can be made brokers. However, the present set-up may not be able to handle a sudden surge in brokers. Further, there is no past examples of their service delivery model, which we can rely on," said the chief executive officer of a private life insurer.
At a time when the insurance regulator has placed huge emphasis over the Anti Money-Laundering (AML) norms, insurers are also concerned about using this channel since the CSCs would deal with cash. The chief distribution officer of a mid-size private life insurance company said that they have already expressed their opinion to Irda about dealing with CSCs on the back of tough AML norms.
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"We do not have any background of who are the people part of each CSC. Since they handle other financial services like telephone bill, electricity bill payments which involve continuous cash transactions, we have to be doubly sure of how the AML practices are being standardised in the CSCs, before entering into any tie-ups," he added.
CSC is a part of the National e-Governance Plan. The Centre’s plan is to roll out over 1,00,000 CSCs across the country with a focus on the rural areas. These CSCs are aimed at providing high quality and cost-effective video, voice and data content and services in the areas of e-governance, education, health, tele-medicine, entertainment and other private services. The CSCs will offer web-enabled e-governance services in rural areas. They can offer application forms, certificates, and utility payments such as electricity, telephone and water bills.
Though insurers agree that CSCs would be able to aid in deeper penetration of rural markets, they would only be selling simple products. A senior executive of a large private general insurance company said that the insurance companies will have to devise specialised products for this channel.
"Too complex or technical products may be difficult for the CSCs to understand since they are not a core part of the insurance system. However, we would then have to compromise on our innovative offerings since all companies will have to offer similar products through CSCs," the official added.
These CSCs will deliver services in the areas of telecom, agriculture, health, education, entertainment, consumer goods, banking and financial services (insurance), utility payments among others. Each CSC is expected to serve a cluster of six to seven villages, thereby covering more than 600,000 villages across India.
Industry sources said that CSCs will be authorised to sell life and non-life policies after its officials undergo the mandatory examination conducted by the Insurance Institute of India. Irda officials also confirmed that insurers, especially life insurance companies, are yet to take any concrete steps to enter into agreements with CSCs.
The public private partnership (PPP) model of the CSC scheme envisages a three-tier structure consisting of the CSC operator (village level entrepreneur), the service centre agency responsible for a division of 500-1,000 CSCs, and a state designated agency to implement the model in the state.
According to industry sources, CSCs will be authorised to sell life and non-life policies after its officials undergo the mandatory examination conducted by the Insurance Institute of India.
With other service requirements like birth and death certificates also proposed to be handled by these centres, there is also a worry about possible fraud in the system. The senior claims-servicing head of a bank-promoted life insurance company explained that there need to be systems in place to ensure that the same officials handling death certificates also do not handle life insurance claims.
"All life insurance death claims require a doctor-certified death certificate. Since CSCs will also be handling these documents, we have to be careful about any conflict of interest or malpractices that could crop up," the executive added.
Though Irda is expected to come out with detailed guidelines on the CSC distribution model within the next one to two months, there is lack of clarity on whether all insurance companies will be expected to tie-up with all CSCs. The general manager of a public general insurance company also added that making it mandatory to tie-up with all the centres across India will increase documentation and also make the process strenuous.
Areas of dispute in CSC model
-Will handle cash from other transactions. Anti Money-Laundering Norms to be more stringent for them
-Birth and death certificates also issued by CSCs. Conflict of interest and malpractices could crop up during servicing death claims in life insurance
-About 1,00,000 CSCs in India. Insurers not sure about whether to tie-up with all of them; against tying-up mandatorily with all
-Service quality is a concern. Since insurers can't set up physical branches, monitoring of CSC standards will be difficult
-CSCs could be either be a servicing channel or brokers. System cannot handle 1,00,000 CSCs as insurance brokers