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To enhance insurance business across India, agents suggest several reforms to IRDAI

Propositions include allowing sub-broking and sub-agents model and barring banks from selling insurance among others

New Delhi: India has a population base of over 130 crores and yet the penetration, as well as density of insurance, is dreadfully low. India's insurance penetration was pegged at 3.76 per cent in FY20, with life insurance penetration at 2.82 per cent and non-life insurance penetration at 0.94 per cent. In this scenario, insurance agents have put forward several propositions to the Insurance Regulatory and Development Authority of India (IRDAI) to enhance the insurance business across the country.

Under the existing norms, IRDAI accords approval to any new Insurance product along with the cost structure, commission, overhead expenses, etc to be payable for such product to the Insurance Intermediaries. However, insurance agents propose that the detailed commission and/or other expenses, etc payable to Insurance Intermediaries should be left absolutely at the discretion of the companies without any further intervention by IRDAI.

They also suggest that the network of insurance intermediaries has to be reinforced by pursuing the "Sub-Broker" under Insurance Brokers and "Sub-Agents" under the Corporate Agents model. This will in turn generate Lacs of employment opportunities for people in India. Sub-Broking and Sub Agency model would enable Brokers and Corporate Agents to spread insurance to those areas that haven't been represented so far. Insurance Brokers and Corporate Agents normally operate in the Tier-I and Tier-II cities, whereas "Sub-Brokers" and "Sub Agents" can work in rural areas. The primary object of this segment is to offer simple, pre-underwritten, vanilla-type products from multiple insurance companies. They can expand the insurance penetration more into smaller towns and villages so that insurance needs for both life and general for retail customers can be served better. This can definitely increase the Insurance penetration particularly in retail lines of business.

Under existing norms of IRDAI, tie-ups are allowed with a maximum of three insurance companies (in each Life/General /Health) for Composite Corporate Agents (CCA) having net worth of Rs. 50 lacs & above. Agents suggest that a CCA having a net worth of Rs 5 crores and above, should be allowed complete free hand in having tie-ups or to work with at least nine Life Insurers and nine General Insurers and all Health Insurers. A strong reason for allowing the increase of net worth is giving an opportunity to a worthy CCA to accelerate its growth and to weed out ineffective distributors from the market, simultaneously providing scope to the performing CCA to work for different insurance companies to make a huge impact in the Insurance market, instead of selling insurance business through Bancassurance.

They have also questioned the practice of allowing banks to sell insurance products. According to them, this has led to maximum customer complaints regarding mis-selling. They ask when insurance companies are not allowed to sell bank products, then why banks should be allowed to sell insurance products? Globally in many jurisdictions, banks are not allowed to sell insurance products.

Agents argue that allowing banks to sell insurance products have put on additional pressure on employees as a result of which they are focusing on their non-core activities like selling insurance product which is easy to sell over the counter with a little bit of pressure on the customers, instead of concentrating on their main product of reducing NPA's and giving loans. They should rather concentrate on the recovery of their bad loans and increasing profitability of their banking business. They should take a high target of increasing their "CASA" and ensuring a high percentage of the population is provided with a bank account so that the Governments funds can be directly passed on to them.

Even before banks started to sell insurance, insurance products were being sold by agents. In fact, it is the foot soldier agents who have increased the insurance business in India. By not allowing banks to sell insurance products the insurance companies can provide huge employment earning opportunities for young and old people to sell insurance products. At present all the top private insurance companies sell 80 to 85 per cent of their insurance products through their in-house banks. So, the government should immediately stop bank insurance in India, even our neighboring country like Bangladesh does not allow bank insurance.

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