Irda wants insurers to do away with 'tied agents'

The Insurance Regulatory & Development Authority (Irda), on Monday, asked insurance companies to do away with the concept of ‘tied agents system’ so that agents can sell policies of any insurer and also embrace technology for faster distribution of products.

Tied agents sell products of a single company. Irda Chairman J Hari Narayan also urged the industry players to reduce the high levels of agent attrition rate in the country and this cannot be done by increasing the commission alone as there is need to strike a balance.

The insurance regulator chastised private insurers for indulging in front-loading enormous management cost, which they should cut in the interest of customers and also must follow the regulation on agent commission.
Inaugurating the two-day ‘Global Insurance Summit: Finding the god particle in the insurance industry’ organised by the Associated Chambers of Commerce & Industry of India, Narayan said the industry must try to retain agents to achieve its growth targets.

Further, he asked insurance companies to revisit their product delivery process and cut their high onboarding cost, so that they can regain the confidence of customers. Narayan even asked insurers to learn from the banking industry as to how they attracted customers since the opening of the banking sector to private players. “Today a brick and mortar model is getting redundant and you must do what the private banks did to get customer satisfaction,” he added.

He said a proposal for lead insurer has been mooted to enable the industry to meet its obligations of reaching out to the rural population.

Furthermore, Narayan said Irda would welcome increase in foreign direct investment (FDI) cap in insurance to enhance growth of the sector. While advocating the need, he said that FDI in insurance would enable the companies to grow and infuse more capital in the business as most of the insurance companies are going through capital crunch. “Insurance, like many other sectors in India, requires greater levels of investment, and in that regard, we would welcome steps to increase FDI in the insurance industry,” he added.

Referring to the meeting of select top insurance companies with the Finance Minister on September 4, where measures to underpin and strengthen the growth of the insurance sector were suggested, and the meeting on Wednesday, is in furtherance to that as they would be sitting down to examine all measures, most of which, are related to income tax, service tax and so on, the Irda chief informed. Dwelling on the guidelines of life insurance products, Narayan said, “Draft guidelines on life insurance products will be sent to the life council for discussion within 2-3 weeks time.”