Money & Banking

Insurance brokers must expand business into smaller cities and rural areas: IRDAI Chairman

Our Bureau New Delhi | Updated on January 17, 2020 Published on January 17, 2020

Subhash Chandra Khuntia, Chairman, IRDA   -  THE HINDU

The insurance broking industry must deepen its business presence in smaller cities and rural areas and not confine themselves to larger metros and cities, said IRDAI Chairman Subhash Chandra Khuntia.

“In a country of our size, there are only 1,000 broking offices largely concentrated in big cities. We have to go down to smaller areas and cities where there is more business. This is a challenge, but you must be mindful of it,” said Khuntia at the 16th IBAI Annual Brokers Summit in New Delhi.

The members of the Insurance Brokers Association of India (IBAI) should also start looking at the life insurance segment as a “focus area” even as they are doing creditable job on the general insurance growth front, said Khuntia.

“Life insurance should be a new focus area for you. The life insurance industry premium is much larger than general insurance. There are also lot of changes in life insurance,” he said

India is the 11th largest insurance market in the world with gross written premium of ₹6.8-lakh crore in 2018-19. Of this, non-life insurance premium accounted for ₹1.69-lakh crore and life insurance premium stood at ₹5.08-lakh crore, according to a joint EY-IBAI report released at the summit.

Currently, brokers handle 25 per cent — about ₹45,000 crore of the gross insurance premium in the country. Khuntia said that brokers’ contribution on the life insurance side is still evolving and expressed confidence that they would make a mark in this segment in the years to come.

Khuntia also said that interest in insurance broking continues to be strong and that IRDAI now approves at least 3 to 4 new broking licenses every month.

As of December 2019-end, there were 459 registered brokers in the country. Only 110 of them have a presence in tier 3 towns and beyond (smaller cities).

Later, Sanjay Kedia, President, IBAI, told reporters that many of the broker members have started to use online technology. The main issue of not looking to go interior is more a problem of viability and not that of intent, he said. IRDAI currently caps the commission earned by brokers and this acts as a hurdle. This issue has been represented to the regulator by IBAI as well as insurers. If this hurdle of cap on commissions that could be earned will go, then not only brokers even agents will look to do business in interior India. The ball is in the regulator’s court, Kedia said.

Similarly, in respect of point of sales (PoS) model, the IBAI has already urged the insurance regulator to permit PoS to sell all insurance products and not only standardised products, he added.

Khuntia expressed hope that more foreign direct investment (FDI) will flow into insurance intermediaries now that the government has allowed 100 per cent FDI and IRDAI has already issued the guidelines.

“We must make efforts to strengthen the broking industry. Foreign capital and skills should be made use of by us for the benefit of creating more Indian jobs. We should learn from international best practices, A time should also come when Indian firms should be able to go abroad and provide our best practices,” said Khuntia.

Kedia expressed confidence that overseas broking players will take advantage of the government move to allow 100 per cent FDI in insurance intermediaries and start looking at deals on this front.

On regulatory sandbox, IRDAI has received 15 applications from intermediaries, including broking entities, and as many as three have already been approved, said Khuntia.

Published on January 17, 2020
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