INSURANCE MARKETING
FIRMPresentation to the PHD Chamber
on 15.04.2015
AGENDA
Background Salient Features Expectations and Concerns Comparison between different
distribution channels
BACKGROUND
Govardhan Committee in its report submitted in 2007 recommended the setting up of “Distribution Companies” to have multiple tie-ups with insurers, a model akin to Independent Financial Advisors(IFA)
Concept of “Insurance Marketing Firm” (IMF) is derived from the above recommendation
BACKGROUND IRDA organized meetings with all
Life Insurance Companies General Insurance Companies Insurance Councils and Marketing Personnel from Insurance
Companies to discuss the “Concept of IMF”
IRDA set up a Working Group (WG) with 10 CEOs of Insurance Companies (5 from Life and 5 from Non-Life) to discuss the issue further.
Working Group (WG) met twice to deliberate on IMF
SALIENT FEATURES OF IMF
IMF can a) solicit Insurance Products; b) provide insurance service activities and c) also distribute Financial Products of other financial sector regulators such as MF; Pension etc.;
IMF will have a Principal Officer with experience in insurance or financial services to exclusively supervise the activities of IMF;
Insurance Sales Person (ISP) will be the ‘Sales Person’ engaged by the IMF to Market Insurance Products;
Financial Service Executive (FSE) will be the individual engaged by the IMF to Market MF/ Pension Products, banking and Post Office products
SALIENT FEATURES OF IMF – CONTD..
Scope & Applicability: Solicitation of insurance products: a) can market
products of 2 life, 2 general and 2 health ins. Cos; b) for general insurance can market only retail (individual) lines of products
Insurance servicing activities: a) back-office activities as per outsourcing guidelines; b) approved person of Ins Repositories; c) surveyor & loss assessor; d) any other activity permitted by Authority
Marketing of other financial products through FSE: a) mutual funds (SEBI); b) pension products (PFRDA); c) other financial products (SEBI); d) banking/ financial products (RBI); e) non-insurance products (Dept of Posts); f) any other product permitted by Authority
SALIENT FEATURES OF IMF – CONTD..
Form of IMF: a) Company; b) LLP c) Cooperative Society; or d) any other entity as may be specified in the regulations
Registration: Capital – Networth – Rs 10 lakhs/ FDI-FII-49% Name – Insurance Marketing Firm in its name Minimum eligibility conditions, educational
qualifications, and training requirement specified in the regulations Principal Officer of IMF – graduate with 10 / 5 yrs
exp ISP of the IMF - 12th Pass
Training – online training akin to brokers trainingExamination - online exam akin to brokers
exam. Agents training & exam not valid
SALIENT FEATURES OF IMF -- CONTD..
FSE engaged by IMF shall fulfill the eligibility criteria and regulatory norms of the respective Regulator
Fit and Proper criteria: laid down to assess the suitability of the IMF to be licensed
PI policy – 2 times turnover of Rs 10 lakhs whichever is min
Code of Conduct and Duties & Obligations: specified for the Principal Officer, ISP and FSE
Customer grievance handling procedure: outlined in the regulations
Validity of license – 3 years
SALIENT FEATURES OF IMF – CONTD..
Remuneration for IMF1) solicitation & procurement a) as per Section 40 of the Act and paid only to IMF b) not to exceed 50% of 1st year commissions and
10% of renewal commissions and allowed for only life insurance which is to be disclosed at the time of filing of product
2) insurance service activities a) to be mutually agreed between the IMF and
insurer b) reasonable depending upon time & effort and
evidenced by an agreement entered at the outset with basis of fees being clearly addressed
3) Applicable service charges – to collect from financial entities for the services rendered by the FSE employed by IMF
SALIENT FEATURES OF IMF – CONTD..
Remuneration ISP1) Min fixed monthly salary of Rs 5,000/- 2) Option to pay incentives based on an
objective well laid down criteria FSE – as per respective regulators guidelines
Migration ISPs of an IMF cannot migrate to insurance
company/ IMF/ broking firm etc during the period validity of licence without obtaining NOC
NOC is deemed to have issued to ISP by the IMF if such application is pending for more than 30 days
SALIENT FEATURES OF IMF – CONTD..
Area of operations Pan India shall employ ISPs who are domiciled in the
district for which the application is made cannot be changed during the course of license.
Only can be considered on renewal Resignation of the ISP – Cannot be dismissed except on death or on
voluntary basis If on voluntary basis shall be reviewed and
approved by a Committee of 3 members nominated by life or general council, as the case may be
SALIENT FEATURES OF IMF –CONTD.
Multi-level Marketing not permitted IMF to report on no. of policies sold, no.
of ISPs employed, premium collected and amount paid to ISPs
Promoters of the brokers are allowed to set-up IMF
Inspection/ Audit/ Suspension/ Cancellation procedure laid down
Duties & responsibilities and obligations of IMF/ ISP/ FSE/ Insurers specified
SALIENT FEATURES OF IMF – CONTD.
Permitted to collect the premiums for online sales similar to Web Aggregators
To review the condition on restriction of jurisdiction after sometime based on their performance
EXPECTATIONS FROM IMF increased insurance penetration by setting
up of IMF at district level reduced mis-selling as IMF would be
answerable to people it sold insurance policies
increased professionalism in the distribution channels
reduction in churn of agency force a career path to the existing insurance
agents to progress increased earnings through selling
insurance and financial products wealth creation in distribution by
entrepreneurs; etc
CONCERNS IN IMF introduction of another distribution
channel may lead to confusion cannibalization of existing agency/ broker
force arbitrage in remuneration
COMPARISON - DISTN CHANNELSAgent Corp Agent Broker Web Agg CSC’s IMF
Type 1. Individual2. Firm3. Company
1. Firm2. Company3. Banking Co4. New Bk Co5. Reg Rur Bk6. Coop Soc7. Panchayat/ Local Auth8. NGO/ Micro Fin/ NBFC9. Any other approved by Auth
1. Individual2. Company3. Coop Soc4. Any other approved by Auth
1.Company1. CSC-SPV2. Village Level Entrepreneurs (VLEs)-Rural Auth Person (RAP)
1. Company2. Coop Soc3. LLP4. Any other app person
Capital Nil Paid-up Cap – Rs 15 lakhs
Paid-up Cap Rs 50 lakhs
NetworthRs 10 lakhs
NetworthRs 10 lakhs
Qual 12th/ 10th class
12th/ 10th class Graduate Graduate 1. CSC-SPV-PO-Graduate2. VLE- 10th class
1. PO-Graduate2. ISP-12th class
Trng 50 hrs 50 hrs Theoretical & Practical – 100 hrs
Same as broker
1. CSC-SPV-PO - same as broker2. VLE– online training
1. CSC-SPV-PO/ ISP - same as broker2. FSE – resp regulator trng
COMPARISON - DISTN CHANNELSAgent Corp Agent Broker Web Agg CSC’s IMF
Examination
IC-34/ 35/ III
IC-34/35/ III Broker Syllabus/ NIA
Broker Syllabus/ NIA
CSC Syllabus/ NIELIT
PO-IMF (Broker) Syllabus/ NIA
Remuneration
1. Life – as per table depending on type of product & prem paying term - max 40% 2. General - Max 15%
1. Life – as per table depending on type of product & prem paying term - max 40% 2. General - Max 15%
1. Life – as per table epending on type of product & prem paying term - max 30% 2. General - Max 17.5%
1. Flat Fee – Rs 50,000 per product2. Outsourcing functions – mutually agreed3. Telemktg/ Distance mktg – as per broker remuneration
1. Solicitation (pre-sales) – as per broker remuneration2. Servicing (post sales) – mutually agreed
1. Solicitation (pre-sales) – as per broker remuneration2. Servicing (post sales) – only for life ins & max 50% of 1st year prem & 10% of ren prem
Thank you
