Irda may exempt banks from agent norms

The Insurance Regulatory Authority of India (Irda) will be drafting guidelines pertaining to corporate agents to avoid misselling and to place proper checks on the industry.

C S Rao, Irda chairman, told Business Standard that the regulator may, however, exempt banks in this regard.

"Insurance companies do not have proper control over the corporate agents due to which some of them have been issuing policies that they are not eligible to. The insured are thus getting confused between the insurer and the intermediary, and do not know whom to turn to. There is no proper disclosure of terms and conditions also," Rao said.

Irda had in September decided to temporarily suspend issuing new licences to corporate agents because of cases of misselling taking place. It is currently reviewing their performance and will not issue further licences till then.

"There will be relaxations with regard to banks as compared to other corporate agents, as banks cannot get elusive. They have huge staff and are more responsible too," Rao said.

"We do not want multi-level marketing to take place in the insurance business. So the guidelines that we will draft, will be, to ensure that the agents who are selling insurance policies have the required licence for it. Insurance companies also need to have greater supervision over the corporate agents and test-checking will also be recommended. Sales need to be accounted for and companies should ensure that clients are fully aware of the terms and conditions," Rao said.

Corporate agents function the same way as brokers do, barring the fact that they can sell only one insurance company's products. Some corporate agents, however, have tried to circumvent this regulation by setting up two or three sister firms so that they can offer a basket of products to their clients.

Insurance brokers have always felt that corporate agents are eating into their share of business without having to comply with the same set of regulations that govern their business. Corporate agents need not provide any indemnity insurance and are not held accountable on claims advice.

They are not required to file any return to Irda also, leading to a lack of transparency and professionalism in their working. The proposed move of Irda will be a step towards changing the current situation.