Insurance agents may soon get to diversify their revenue streams as the insurance regulator is considering permitting them to sell policies of multiple insurers as well as other financial products, such as mutual funds and pension plans.

They will be able to do so if the new distribution concept of an insurance marketing firm mooted by the Insurance Regulatory and Development Authority (IRDA) becomes a reality.

This proposal comes at a time when the life insurance industry is facing heavy agent attrition.

During 2012-13, the life insurance industry saw a 10 per cent decline in the number of individual agents — from 23.58 lakh as on March 31, 2012, to 21.22 lakh as on March 31, 2013.

Insurers feel that selling only insurance policies is not very lucrative for agents, especially due to rationalisation of the commission structure under the new product regulations implemented by the IRDA.

Sustainable revenue According to the draft regulations for insurance marketing firms released by IRDA recently, these intermediaries can sell insurance products of multiple insurance companies. It can also retail other financial products such as mutual funds and National Pension System products approved by financial sector regulators.

Currently, the insurance regulator allows only a tied system of agents, whereby each agent is only allowed to sell policies of one life insurer, one non-life insurer and a standalone health insurer.

Manoj Jain, MD of Shriram Life Insurance, said the insurance marketing firm model will allow intermediaries who are industry veterans to recruit other agents which will ensure that the revenue stream comes from various products.

V Manickam, Secretary General of Life Insurance Council, which has been organising seminars on the feasibility of insurance marketing firms in major cities said it has got encouraging response from intermediaries.

Draft regulations In the draft regulations for insurance marketing firms, IRDA has spelt out stricter liability in the sales process.

This will be in the form of fiduciary responsibility, and geographical restrictions, in terms of operating in only one district.

Amitabh Chaudhry, MD and CEO, HDFC Life Insurance, said: “It’s a great move by the regulator as in the current model there are too many agents selling too few policies. So, we need independent financial firms over a period of time selling a larger number of policies to a larger number of people.”

However, Chaudhry said the model will take some time to gain traction as the intermediaries will analyse the new model to see whether the rewards and the extra obligations they have to take on are favourable.

Manickam said while some of the current recommendations may be restrictive as the model is still in the concept stage, there will be some scope for changes as more intermediaries start opting for it.

The Life insurance Council will send recommendations gathered from the life insurance companies by the month-end, after which the IRDA will release the final regulations.

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