The Hindu Business Line : IRDA bestows more powers on agents for micro-insurance

THE agent will now be the face of insurance companies in the case of micro-insurance. Insurance Regulatory and Development Authority's new regulations for micro-insurance would bestow more powers and more money on the agent.

In India, micro-insurance is defined by the size of the policy (Rs 5,000-Rs 50,000 sum assured) and covers health, household and fire insurance portfolios that are non-commercial or of lower asset value. The main changes in the regulation include allowing life and general insurance companies to distribute each other's products, reducing the minimum sum assured to below Rs 5,000 in the case of health insurance and making the agent the chief point of contact for the customer.

The new regulations aim at revamping distribution in rural areas. While life and general insurance companies will be allowed to sell each other's products, agents will now be bestowed with new powers. "They will now be able to receive premium as well as aid in the process of claim settlement. Agents will now help customers fill their forms, take photographs of damages and even deliver the claimed amounts to the customers," said a member of the IRDA committee on micro-insurance. Currently, insurance companies send the cheque for the claimed amount directly to the customer.

Distribution of micro-insurance will now be more NGO-driven, since a collective entity is more credible than individual agents, said a source.

Hike in commissions: Commissions have also been hiked to 20 per cent. At present, commissions differ according to the portfolio of business — 7.5 per cent for fire insurance and 15 per cent for health insurance. Insurance companies, however, differ in their responses to the hike in commission. Some say commissions should be higher, given the smaller size of the policies.

For a policy with a sum assured of Rs 5,000, the premium could be roughly Rs 70 in which case the agent would earn only Rs 14. "Agents in rural areas cannot earn their livelihoods by selling insurance policies, unlike their urban counterparts. So, some insurance companies have been pressing for higher commission," said a senior official at an insurance company.

However, another official from an insurance company begs to differ. "Increasing the commission to 20 per cent would further eat into the insurance company's earnings," said the official.

Mr Sandeep Bakhshi, MD and CEO, ICICI Lombard General Insurance, said, "The new regulations with respect to micro-insurance are extremely progressive."

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IRDA bestows more powers on agents for micro-insurance