Insurance marketing firms are registered by the IRDAI to solicit or procure insurance products, to undertake insurance service activities and also to distribute other financial products as specified in the regulations by employing individuals licensed to market, distribute and service such other financial products.
These entities can tie up with up to six insurance companies. While this was mandatory earlier, the IRDAI later decided that insurance marketing firms need not compulsory tie up with two life, two general and two health insurance companies. The regulator also said no insurance company could restrict an insurance marketing firm from having tie-ups with other insurance companies.
Insurance marketing firms employ insurance service providers to solicit or procure insurance products. But an insurance marketing firm is free to solicit or procure insurance business from all over the country. To enable more insurance service providers to join, the regulator has said that every provider employed by an insurance marketing firm has to be paid a fixed monthly salary not lower than Rs 5,000.
While the endeavour was that insurance agents would play an active role by becoming insurance marketing firms, not many have come forward. The chief distribution officer of a mid-size private life insurer said the incentive structures were not attractive enough for agents to move into this channel on a large scale.
The IRDAI has said the remuneration payable to the insurance marketing firm by the insurer for solicitation of policies by insurance service providers shall be treated on the same terms as applicable to brokers for existing products.
Since it is not mandatory to tie up with six insurers, not all insurance marketing firms have entered into multiple tie-ups. Some have restricted themselves to one insurer in life, non-life and health while a few others have only tie-ups in one category. Insurers said while the new channel might help them acquire more business, some constraints were yet to be resolved.
For instance, the CEO of a life insurance company said there were some issues related to the salesperson being a local of a district. He added it might not be feasible to find insurance service providers in some locations.