Insurers divided over proposed corporate agency norms

The new corporate agency norms mooted by the Insurance Regulatory and Development Authority of India (IRDAI) have virtually divided the insurance industry.

In an exposure draft, the authority had said that it plans to allow each of the corporate agents to sell policies of a maximum of three life insurers and three general insurers, besides a host of other changes. At present, corporate agents are allowed to sell policies of only one life insurance and one non-life insurance company.

There was a flurry of activity among insurers as the regulator had asked them for their views by April 10. Though many insurers sought more time to respond through the Life Insurance Council, there is no word from the IRDAI on any extension of deadline which expired last week.

Over a half a dozen life insurers which are not promoted by banks have already expressed their happiness over the proposed norms.

“This will definitely augur well for better penetration of insurance as the entire reach of banks can be utilised in an optimum manner. If one channel is getting closed for bank-led insurers, the other doors will be opening,” Manoj Kumar Jain, Chief Executive Officer, Shriram Life Insurance Company, told BusinessLine here on Monday.

Bank-led insurers, however, have a different view.

“It will surely lead to loss of business because we are supposed to bring down business from a single channel to 50 per cent progressively over five years. There is little rationale in destroying the existing base and trying to create new ones,” said a top executive of a bank-promoted insurance company.

Vighnesh Shahane, Chief Executive Officer, IDBI Federal Life Insurance Company, feels that the proposed open architecture should be more of an enabling nature rather than mandatory. “Like the present practice in mutual funds, it should be left totally to banks,” he said. Further, the bandwidth of banks for selling insurance products of these companies from the life and non-life segments should also be taken into consideration, Shahane said, adding: “All said and done, sale of insurance is only a part of the other income of banks, accounting for less than three per cent of their revenue. It is not their core business.”

According to CL Bharadwaj, Senior Vice-President (Compliance) and Chief Risk Officer, Bharti AXA Life Insurance, the new norms would require exclusive products to be designed to be sold by the corporate agency, and these have to be cleared by the authority.

“This will limit the choice for the insurer in product designing,” he added.

Once implemented, the new norms are expected to trigger higher interest of various entities, including banks, non-bank finance companies and others. While there are over 250 corporate agents currently, the main activity, however, could happen in bank-insurance tie-ups.

The bank-led insurance companies will face more challenges if the proposed norms are brought into force without any change.

“Companies like us have been used to exclusivity. So, there will be short-term challenges,” agreed the IDBI Federal Life chief.

But all agree that customers will be the ultimate gainers as all these would mean more choice for them. But it remains to be seen how the regulator reacts to the feedback from insurers.

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