Paid Agency System - new initiative from IRDAI

PAID AGENCY SYSTEM NEW INITIATIVE FROM IRDA

CLIA is almost scrapped through Insurance amendment Ordinance 2014, IRDA has introduced a new channel of Distribution called Insurance Marketing Firms(IMF) w.e.f 28-02-2015. Any Individual who is Graduate with Insurance experience of five years can apply for a License of IMF. Many retired LICians can start these firms. The IMF will recruit Insurance Sales Person who is a rolled employee of the firm and the Insurance Companies need to pay the remuneration of ISP(insurance sales persion) which is not less than Rs 5000 per month. In effect it’s called paid agent(CPA).

 Capital Requirements//

 The individual taking IMF need to establish himself that he had Net worth of Rs 10,00,000/-. A chartered accountant certificate to this effect is only required.

 Multiple tie ups with Insurance Companies//

 Registration of Insurance Marketing Firm by engaging ISP for the purpose of soliciting and procuring Insurance Products of two Life, two General and two Health Insurance companies at any point of time, under intimation to the Authority.

 The requirements for becoming ISP//    

 1. 12th pass

 2. Passing the specific test for ISP (50 hours training)

 Remuneration to IMF//

 The remuneration payable to Insurance Marketing Firm by the Insurer, for the solicitation of policies by the ISPs shall be as specified by the Authority, from time to time, under Secs. 40(1) and 40(2) of the Act, as amended from time to time

 Every ISP employed by the Insurance Marketing Firm shall be paid a fixed monthly salary, which is not lower than Rs. 5,000 per month or such other sum as may be specified by the Authority from time to time.

 In addition, the Insurance Marketing Firm may receive fees or charges from life insurance companies only in the form of service charges for recruitment, training and mentoring of their ISPs. These fees or charges shall not exceed 50% of first year commission and 10% of renewal commission received by IMF.

 No such payment shall be made in case of general/health insurance business.

 The life insurance companies shall have to disclose to the Authority upfront at the time of filing their products under file & use guidelines on payment of such fees or charges to the Insurance Marketing Firm.

 Job Security for ISP//

 Ø The Insurance marketing Firm under no circumstances can dismiss the ISP from employment during the period of the registration i.e. for 3 years, except as allowed under Reg. 27 (2) (b). So no cost norms or MBG.

 Ø There is no age bar specified in the regulations regarding Insurance Sales Person.

 Ø There is no recruitment bar of ISP specified in the Regulations.

 GOIB for ISP//

 In addition to the minimum amount specified above, the Insurance Marketing Firm, depending upon ISPs performance can pay him additional incentives, which are declared upfront and form part of the employment agreement between him and the Insurance Marketing Firm.

 Indemnity Insurance// The IMF and its ISP need to take compulsorily Loss reducing Indemnity Insurance for 10 lakhs where in there is any dispute with customer and found that there was misconduct or fraud, the Indemnity insurance will take care of the losses. So no fear of writing MHR

 Agents can become ISP// Existing agents can surrender there license and Join IMF as ISP. For an ISP to become an Insurance agent NOC from IMF is required.

 Already there is reluctance from people to join as agents since there is no fixed salary, here they can get fixed salary + Incentives, Job security, No MAB and can sell LIFE, General and Health insurance of 2 companies each. Private companies will definitely promote these kinds of marketing firms and there will be lot of mis selling in the Market and the biggest surprise is for conducting Inspection in IMF by IRDA ten days prior notice to be given. Acche din ayegga?

 There may be omission and Correction in this article, please suggest any modifications required

 see the Gazette Notification of the IMF regulations in IRDA website