Irda shackling of corporate agents finds favour

Insurance brokers have welcomed the recent announcement by Irda (Insurance Regulatory Development Authority) to temporarily stop issuing of licences to corporate agents.

For some time insurance brokers have felt that corporate agents are eating into their share of business, but not complying with the same set of regulations.

Speaking on the sidelines of an International Conference on Regulatory Practices and Emerging Trends in Life Insurance, C S Rao, chairman of IRDA, had recently expressed unhappiness with the level of disclosures made by corporate agents.

"In the existing system a person who is qualified to be an agent can directly get a licence from the company he wishes to sell products for and the same is applicable to corporate agents. The matter of concern is: what extent agents are disclosing information to insurers and Irda wants to review this information," he said.

The corporate agency system works a lot like brokers except for the fact that they are restricted to selling a single insurer's products.

According to a Mumbai-based broker, certain corporate agents have circumvented this restriction by floating more than two or three sister firms.

"From the corporate agents' perspective, with three or more tie ups through their own sister firms, they can virtually operate as brokers offering a basket of products to the clients. They do not have any curb on capital, or qualification or any other process that is attached to brokers and the difference in the commission paid is only about 2.5 per cent, which one would be willing to let go," the broker points out.

Says N Raveendran, principal officer at the Chennai-based Allegion Insurance Services Ltd, a insurance broker: "In reality, corporate agents have been able to get better deals from the insurers and they actually earn more than the brokers in some businesses. The corporate agents need not provide any indemnity insurance, are not held accountable on claims advice. They need not file any return to Irda unlike brokers who need to file month on month. Therefore, transparency and professionalism, which are advocated to be the basis of future growth of insurance industry in India is missing in some of these companies."

According to estimates there are more than 1000 corporate agents and about 165 brokers in the country.

Brokers themselves have also not been exactly overboard. There have been instances, according to officials associated with Irda, wherein consumers have been sold insurance policies from a only certain set of insurance companies.

"Certain insurance companies offer better commissions and there are some brokers who tend to hawk policies only from such insurers to clients," a Chennai-based broker admits.

But insofar as the regulator is concerned, the issue of one distribution channel canibalising the other, may not matter much as the Irda is more concerned with whether the consumer is able to get a plethora of choices and the best possible deal.

"The regulator's concern is the customer and whether the customer gets the best options available," according to officials associated with Irda.