Disfavours insurers’ plan to have life agents sell non-life plans.
A plan of life insurers to restructure their distribution network may come unstuck, with the Insurance Regulatory and Development Authority (Irda) unwilling to allow agents to sell standalone medical and accident plans.
Many insurers with non-life arms had approached the regulator for this permission, without any additional certification.
“The plan was to give distributors an opportunity to sell non-life products of our non-life arms. This would have ensured that they continue to stay interested in the new regime,” said a CEO of an insurance company. Many life insurance products have both accident and medical riders and standalone policies. So, allowing them to sell standalone policies of non-life arms should not be a problem.
Qualification
However, senior Irda officials said they might not consider this proposal. “While there is no harm in allowing life distributors to sell non-life products, there is a concern that they may not be able to sell these effectively without certification,” said the official.
Till now, five to 10 per cent of the total agency workforce of leading private life insurers like Bajaj Allianz or Tata AIG, with a non-life partner, comprise composite agents. Such agents sell both life and non-life insurance products. “We were looking at roping in at least another 15-20 per cent of big volume generating agents in the next six months,” said a managing director of another life insurance company.
When one takes an agency for any insurance company, the insurer facilitates the 100-hour training course and a test, one each for life and general insurance.
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Industry sources say in the new regime, unit-linked insurance plans (Ulips) will pay up to seven-eight per cent commission to agents in the first year, which will drop in subsequent years. The maximum commission that agents will be able to earn is 25-40 per cent over a five-year period.
In comparison, agents are paid 10-15 per cent annually in a medical insurance policy. Also, since most medical insurance policies have to be renewed every year, agents can keep earning the same returns. Insurers wanted to compensate them partially for the reduction in revenues from Ulips, without incurring any additional expenses. “There was no better way of saving both parties’ incomes,” said the chief financial officer of one of the top life insurance companies.
No pension plan in first lot
While Irda will clear the first group of 74 applications for restructured products by these weekend, there will be no pension plans among them. For, insurers have deferred seeking clearance for these products.
Industry sources said the Institute of Actuaries of India was reviewing the regulation mandating life insurers to return a minimum of 4.5 per cent in the first year on pension plans.
“Based on that report, we will decide if the matter should be taken to Irda or not,” said G N Agarwal, president, The Institute of Actuaries of India and chief actuary of Future Generalli Life Insurance Company. Irda asked life insurance companies to give a minimum of 4.5 per cent till March 2011.
After that, the returns will average the quarterly reverse repo plus 50 basis points. Insurers have issues with the defined rate of return.
They say 4.5 per cent could be too high because the rate of return to be generated will have to be six-seven per cent to account for the costs.
But the industry is hopeful of a resolution soon. P Nandagopal, MD and CEO, IndiaFirst Life Insurance, said, “Though we have not been given any timeline for the resolution, we should be able to file pension products any time in September.”