Now a New Entity to Sell Insurance

ents, insurers' direct sales force, corporate agents, brokers, web aggregators and microfinance institutions. This year another channel for sales of insurance called Insurance Marketing Firms (IMFs) began operation. According to the latest list published on September 8, 34 entities have been licensed by the regulator so far.

Insurance penetration in India is low and the average ticket size of insurance that people own is small. According to industry experts, the regulator has launched this new channel to intensify insurance distribution at the district level. "The purpose behind launching IMFs is to attract independent entrepreneurs to set up their own firms and sell life, general and health insurance products," said Ashish Vohra, senior director and chief distribution officer, Max Life Insurance.

The new channel will also provide established and successful agents an opportunity to scale up their operations. "Many high-performing agents want to sell the products of several insurance companies. To be able to do so, they typically make different members of their families agents of different companies. This is a cumbersome arrangement. Now they can set up an IMF and sell the products of several insurers out of one firm," said Sanjiv Bajaj, managing director, Bajaj Capital.

One difference between different third-party sellers of insurance arises from how many companies' products they can sell. An individual agent can sell the products of one life, one general and one health insurer (1+1+1). "IMFs can work for two players in each of the three segments," said Vishal Jain, principal officer of Futuristic Life, a Mathura-based IMF.

Corporate agents can sell the products of three players in each segment, and there is no ceiling on the number of insurers whose products a broker can sell. Besides insurance products, an IMF can also sell other financial products, such as mutual funds, National Pension System, Post Office products and so on, provided it has obtained the necessary licences from various regulators to sell them.

The capital requirement of third-party sellers also differs. While there is no minimum net worth criterion for agents, IMFs must at all times maintain a net worth of Rs 10 crore, while for brokersthis requirement goes as high as Rs 50 crore. "The minimum capital requirement for IMFs will ensure that only dedicated and financially strong entities enter this business," said Kapil Mehta, founder and chief executive, Secure Now Insurance Broker.

Since an IMF is a neighbourhood operator, he can provide doorstep service to his clients, just as an agent does. Corporate agents typically operate out of their branches and the customer has to visit them. An IMF can also offer more choices to his customers than an agent. However, an IMF can't compete with corporate agents and brokers who can offer greater variety.

Customers must remember that IMFs, like agents, represent the insurer. Their position is different from that of a broker, who is supposed to act as a representative of the customer. Customers should observe some of the golden rules of  purchasing insurance when buying from IMFs. Understand your own needs first. Next, compare the premiums and features of few different companies. Many players now publish ratings of insurance products which you should consult. Every insurance product comes with a key features document of one or two pages only. Go through it thoroughly before buying. Read the fine print of insurance documents before signing on them. If you belatedly realise that have bought the wrong product, use the 15-day free look period to return it.