The Hindu Business Line : IRDA panel to examine distribution channels

New Delhi, Sept. 29 The Insurance Regulatory and Development Authority (IRDA) has set up a 10-member committee to look into the working of the various distribution channels of insurance companies.

The committee, which is headed by Mr N.M. Govardhan, former Chairman of Life Insurance Corporation of India, has members from both public and private sector from life as well as non-life companies. It is expected to submit its report by end of December.

“It has been observed that some practices have crept into the system in terms of remuneration or reimbursement of expenses or incentive schemes of the agents. So, in order to ascertain whether they are in conformity with the provisions of the Insurance Act and their impact on the acquisition cost, the IRDA has felt the need for a detailed examination and that is why the committee has been constituted,” a member of the committee told Business Line.

In the last couple of years, IRDA has enlarged the scope of the intermediaries structure from the traditional tied individual agents to corporate agents, micro-insurance agents, bancassurance mode and the referral system. Apart from these channels, insurers have also adopted other means of sales to suit e-sales such as computer points, on-line insurance purchase etc.

The committee would also look into a host of day-to-day issues relating to policyholder protection.

“Apart from looking into the manner in which these channels have been functioning, the committee will also look into their efficacy, cost effectiveness, weaknesses and make recommendations on the changes that need to be made to make them more effective, professional and accountable,” the official said.

Reviewing licensing

The committee will also review the system of licensing of corporate agents and suggest the criteria for selection of corporate agents and the qualifications for the functionaries. It will consider the advisability of permitting several corporate agencies within the same group, the promoter of the insurance company also acting as the corporate agent.

Besides, it would examine the commission structure and recommend changes, and in particular look into the additional payments made to intermediaries and their justification.

“We would also give recommendations in respect to the referral system. Until now only banks could provide referrals, but now there is a suggestion to add other entities also. Then there is the issue on the remuneration paid to the referral providers,” the official said.

He added that with regard to the scope of direct marketing, e-marketing, Web-enabled sales points and other innovations, the committee would look into the terms and conditions prescribed for each mode, including the remuneration structure.

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IRDA panel to examine distribution channels