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The Insurance Regulatory and Development Authority of India (Irdai) has allowed insurance marketing firms to solicit and procure products of two life, two general and two health insurance companies, through salespersons.
The firms would also have financial service executives (FSEs) who would be able to distribute any product — credit cards, mutual funds or National Pension System products, apart from loan products from non-banking finance companies.
Sanjay Tripathi, senior executive vice-president, HDFC Life, said insurance marketing firms will be a one-stop shop for all financial needs. “Financial marts will help improve distribution reach in the Tier-II and -III towns.”
Irdai defines an insurance marketing firm as a registered entity to solicit or procure insurance products, to undertake insurance service activities and to distribute other financial products by employing individuals licensed to market, distribute and service such other financial products.
Insurance service providers would have to be school passouts and take a written examination to qualify for the post. The FSEs would be issued licences by the financial regulators concerned.
At present, insurance penetration is less than five per cent of gross domestic product. Due to large untapped regions, the growth of premiums is also slow. Slow career growth and low remuneration also forces many insurance agents to quit (50,000 per year) the sector.
The new channel is expected to service the needs of the existing policy holders. It would also boost premium collection.
Sanjay Datta, head, underwriting and claims, ICICI Lombard General Insurance, said insurance marketing firms will enable non-life insurers to distribute simple retail products. “The whole idea is to boost penetration and have a cross-selling mechanism through this channel, since insurance products could be sold to mutual fund customers (and vice-versa).”
He added existing insurance agents may also look at insurance marketing firms as a new career opportunity. They would be paid a minimum salary of Rs 5,000 per month. FSEs would be remunerated according to the regulations and norms of the sector.
Sector experts said while insurance activities have been restricted to only six companies by each firm (two life, non-life and stand-alone health each), this will be thrown open to all the insurance companies later.
While sector players are upbeat about this model, there are likely to be teething problems. Once these have been addressed, remuneration would rise.
This would also help reduce cost of operations, as the insurance marketing firms would reach the uninsured population, rather than set up a physical presence.
