The insurance regulator is weighing the possibility of allowing insurance sub-brokers to increase penetration of insurance in semi-urban and rural areas. At present, retail distribution of insurance is through agents who are representatives of insurance companies unlike brokers who are independent intermediaries.
The Insurance Regulatory and Development Authority (IRDA) has set up a panel headed by P C James, professor at National Insurance Academy. The panel includes members of the life and non-life industry and the broking community.
The panel will look into what is required to have a retail broking system. It will also recommend the qualifications, examinations and licensing systems for those being part of the retail broking system. Finally, the panel will provide recommendations on contractual relation between brokers and sub-brokers.
“To increase penetration of personal lines of business, sub-broking should be allowed. The current regulations allow only an employee of a broking firm to distribute insurance. Also, every client-facing employee of the broking firm has to clear a broking examination which restricts a lot of brokers from getting into personal lines of business,” said Praveen Vashishta, CEO & MD, Howden India Insurance Brokers.
Broking firms say that the cost of training each employee ranges from Rs 50,000 to Rs 60,000 considering that 100 hours of training is mandatory and exams are conducted in few centres. This results in companies having to spend on travel and accommodation of their employees.
According to Vashishta, even if sub-brokers are separately registered by IRDA, the broking firm has to be responsible for the action of sub-brokers and professional indemnity policy that brokers are required to maintain should be extended to cover sub-brokers as well to protect clients.
Besides the training, there is another entry barrier in the form of capital requirements. Broking firms require capital between Rs 50 lakh to Rs 2 crore. In small cities, there is not enough business to justify large investments in the licence.
http://timesofindia.indiatimes.com/business/india-business/Sub-brokers-may-get-to-sell-insurance/articleshow/17945861.cms
