Insurance Marketing Firms Stick to Pure Insurance Activities

Insurance marketing forms (IMFs) which were licensed as a separate entity under the intermediary category by theInsurance Regulatory and Development Authority of India (IRDAI) have stuck to pure soliciting or procuring insurance products. While 44 entities have been registered as IMFs by the IRDAI, only five of them are involved in distribution of other financial products. IMF is an entity registered by the IRDAI to solicit or procure insurance products, to undertake insurance service activities and also to distribute other financial products as specified in the regulations by employing individuals licensed to do these activities.

These entities can tie-up with six insurance companies. While this was mandatory earlier, the IRDAI later decided that IMFs need not compulsorily tie up with two life-, two general-and two health insurance companies. The IRDAIalso said that no insurance company can restrict IMF from having tie-up with other insurance companies. The IMFs will employ insurance service providers (ISPs), individuals involved in soliciting orprocuring insurance products. But, IMF is free to solicit or procure the insurance business from all over the country.

According to the regulation, IMFs can enter into tie-ups with two insurers each in life, non-life and standalone health insurance. To enable more ISPs to join the sector, the regulator has said that every ISP employed by an IMF to be paid a fixed monthly salary, which is not lower than Rs 5,000 per month.While the endeavour was that insurance agents will play an active role by becoming IMFs, not many have come forward. The chief distribution officer of a mid-size private life insurer said that the incentive structures were not attractive enough for agents to move into this channel on a large scale.

The IRDAI has said that the remuneration payable to an IMF by the insurer for solicitation of policies by the ISPs shall be treated according to the same terms of remuneration applicable to the brokers for the existing products. Since it is not mandatory to tie-up with six insurers, not all IMFs have entered into multiple tie-ups. Some have restricted themselves to one insurer in life, non-life and health while a few others have only tie-ups in one category.Insurers said that while the new channel may help them get more business, some constraints are yet to be resolved. For instance, chief executive officer of a life insurance company said that there are some issues related to sales person, who has to be appointed mandatorily be from the same district. He added that these must be ironed out since it may not be feasible to get ISPs in some locations.