Irda Norms For Brokers, Corporate Agents Soon

The Insurance Regulatory and Development Authority (Irda) is coming out with guidelines for brokers and corporate agents in a fortnight. It will also notify an amendment to the existing norms to permit premium payments through Internet and credit cards.

The regulator is also in the process of revising the definition of 'rural sector' in line with the norms adopted by the census commissioner. In addition, it also proposes to expand the definition of 'informal sector' beyond the present scope.

The steps would help the private insurance companies, many of whom have failed to comply with the regulatory norms on rural and social-sector sales.

 

"We had sought views on appointment of Irda-accredited brokers. We have now finalised the guidelines which would be notified by the end of this month. We would receive applications from brokers and hope to certify them by Diwali," Irda chairman, N Rangachary, said at a seminar organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) here.

As per the proposed guidelines, corporate agents would be treated as employees of the company for which they were working and would require a cooling period of one year if they switched jobs. The company would be required to pay the Irda for each agent employed. An agent could, however, get accreditation as a broker by paying the required fee to the regulator.

Based on the recommendations of the insurance advisory committee, the Irda has decided to revise the definition of 'rural sector' to comply with the norms followed by the Registrar General of India in census operations.

Rangachary said that insurance companies should keep an eye on interest rates while offering assured-returns and single-premium products, and maintain sufficient reserves to prevent asset-liability mismatches.

"Any new product being offered by a company is soon copied by the others. We get applications from rival companies within 15 days of the launch of a new product. While such competition is healthy for the market and cannot be avoided, the preponderance of single-premium policies and assured returns products offering high interest is likely to affect solvency (asset-liability ratio) of life insurers. Insurers should be guided by market rate of interest and build reserves for such policies," Rangachary said.

Under a single-premium policy, a policyholder has to pay premium only once and gets a hefty return after a stipulated period. The attractive returns have allured many investors to put in a bulk of their savings in such policies.

Market leader Life Insurance Corporation (LIC) has recently mopped up huge resources through its single-premium scheme, Bima Nivesh, but has had to reduce the rate of return on the scheme when the Reserve Bank of India brought down the benchmark bank rate drastically in the last two years.