So far, insurance products were being sold to you by agents, insurers’ direct sales force, corporate agents, brokers, web aggregators and microfinance institutions. This year, another channel called insurance marketing firms (IMFs) began operations. According to the list published by the Insurance Regulatory and Development Authority of India (IRDAI) on September 8, 34 entities have been licensed so far.
Industry experts say that the regulator has launched this new channel to increase insurance penetration. “The purpose is to attract independent entrepreneurs to set up their own firms and sell insurance products,” says Ashish Vohra, senior director and chief distribution officer, Max Life Insurance. The new channel will also provide successful agents an opportunity to scale up their operations. “High-performing agents want to sell the products of several insurance companies. To do so, they make members of their family agents of different companies. This is a cumbersome arrangement. Now they can set up an IMF and sell the products of several insurers,” says Sanjiv Bajaj, managing director, Bajaj Capital.
One difference between different third-party sellers arises from how many companies' products they can sell. An individual agent can sell the products of one life, one general and one health insurer (1+1+1). IMFs can work for two players in each of the three segments; corporate agents can work for three players; and there is no ceiling on the number of insurers whose products a broker can sell. An IMF can also sell other financial products, such as mutual funds, National Pension System, post office products, etc., after obtaining the required permissions from their regulators.
While there is no minimum net worth criterion for agents, IMFs must at all times maintain a net worth of Rs 10 crore, and brokers Rs 50 crore. “The minimum capital requirement for IMFs will ensure that only dedicated and financially strong entities enter this business,” says Kapil Mehta, founder and chief executive officer, Secure Now Insurance Broker.
Since an IMF is a neighbourhood operator, he can provide doorstep service, just as an agent does. Corporate agents typically operate out of their branches and the customer has to visit them. An IMF can also offer more choices to customers than an agent.
However, an IMF can’t compete with corporate agents and brokers on this count. Customers must also remember that IMFs, like agents, represent the insurer. Their position is different from that of a broker, who is supposed to act as a representative of the customer.
Here are a few rules to remember when buying from IMFs. Understand your needs first. Compare the features and premiums of a few companies. Many players now publish ratings of insurance products which you should consult. Every insurance product comes with a key features document of one or two pages. Go through it before buying. Read the fine print of insurance documents before signing them. If you belatedly realise that you have bought the wrong product, use the 15-day free look period to return it.
PROS AND CONS OF IMFs
Like agents, IMFs can offer you doorstep service
Minimum capital requirement of Rs 10 lakh, so serious players likely to come in
IMFs can offer more choices than agents
However, they can't offer as much choice as corporate agents and brokers