HYDERABAD: The Insurance Laws (Amendment) Ordinance, 2014, which prohibits multi-layered agent structure for sale of insurance products, is unlikely to impact insurers as they do not practice multi-level marketing to sell products.
According to companies, insurers do not employ principal agent, chief agent and special agent, which the Ordinance has barred the industry from.
However, as for the penalty of `1 crore on insurers for all the acts and omissions of its agents and in case of any violation of code of conduct, companies say it is a bit steep.
“It is a reflection of the basic principles of agency, that the principal (insurer) is responsible for the acts of its agents. However, the penalty indeed seems to be on the higher side,” C R Mohan, VP & State Head - Telangana and Andhra Pradesh, Bajaj Allianz General Insurance told Express.
He added that since it was part of the law now, hopefully the companies will be more diligent in training the agents and other relevant aspects. This will in turn benefit the policyholders, which is the ultimate goal.
Currently, insurance penetration in India is dismal at 3.2 per cent. With a CAGR of 12-15 per cent in five years, insurers hope to increase penetration to 5 per cent by 2020. But in order to do this, insurers need to aggressively market their products either through agents, brokers, banks or insurance repositories. There are over 52 players including 28 non-life insurers and 24 life insurers, who between them have 327 authorised brokers besides agents, insurance repositories and third-party administrators.
According to V Manickam, secretary general, Life Insurance Council, the number of agents in the life insurance industry, slipped to 20 lakh currently from 29 lakh in 2010-11 and 21 lakh as on March, 2014.
In 2013, the Insurance Regulatory and Development Authority of India (IRDAI) has allowed banks to act as corporate agents and sell multiple insurance products contrary to trade body Life Insurance Council’s suggestion that banks should sell products of only one life and one non-life insurer.
Currently, over 20 per cent of the general insurance business is done through bancassurance and growing.
Besides, the sector watchdog also allowed standalone health insurers to avail the services of agents, corporate agents of other land/or non-life insurance companies to distribute their products provided they undergo 25 hours training.
However, such agents are not allowed to offer services to more than one standalone health insurance company.