REGULATOR ISSUES DRAFT GUIDELINES FOR INSURANCE MARKETING FIRMS IN INDIA
Source: Asia Insurance Review, 4 April 2014
India's Insurance Regulatory and Development Authority (IRDA) has issued draft guidelines for insurance marketing firms, in a move which paves the way for a new distribution channel. An insurance marketing firm will be allowed to market insurance policies along with other financial products such as mutual funds that are approved by financial sector regulators, IRDA said. The proposed model would be similar to that of an independent financial advisor. The insurance marketing firm would be licensed by IRA to engage insurance salespersons for the purpose of marketing all kinds of insurance products, and financial service executives for marketing mutual fund products, pension products and other authorised financial products. These licensed individuals will have to obtain the necessary qualifications and licences from the respective regulators. The remuneration of insurance salespersons will not be commissionbased. According to the draft rules, they would be paid a fixed amount and a performance incentive. The role of the salespersons will lean more towards being a broker and they will need to keep the interests of their customers paramount. To be an insurance marketing firm, a company will need to have net worth of at least INR1 million (US$16,600) at all times and buy a professional indemnity insurance policy that is equal to four times the business turnover of the marketing firm. The licence will be given for three years. Insurance marketing firms will be allowed to charge commissions and fees to cover marketing expenses, according to the draft.