Insurance agents, brokers now under same ambit

In the recently promulgated insurance ordinance, the government has brought corporate agents within the definition of ‘’insurance intermediary’’ in line with brokers thereby opening up the debate on whether banks can now act as brokers and seek partnership with multiple insurers.

In the ordinance, approved by the government on December 24 and signed by the President on December 26, the Centre expanded the definition of “intermediary” by bringing corporate agents within its ambit. “Insurance intermediary includes insurance brokers, re-insurance brokers, insurance consultants, corporate agents, third party administrators, surveyors and loss assessors and such other entities as may be notified from time to time by the authority,” said the Insurance Ordinance in its definition of intermediary.

In the earlier definition, corporate agents were not defined as intermediary and the Insurance Act had mandated exclusive distribution arrangement only for agents including corporate agents.

The email and messages sent to the Irda chairman on Monday, asking the impact of the same, went unanswered until late Tuesday.

Former Irda chairman, J Hari Narayan, however, said that an agent is an agent and a broker is a broker, their roles are defined. “Going forward, Irda will have to come out with a regulation with regard to corporate agents and will have to specify their reporting mechanism,” said Hari Narayan.

Within the industry, while some feel that by bringing them under the common head of ‘intermediary’, the government intends banks to also act as brokers and sell products of various insurers in a bid to increase penetration, there are others who feel that they continue to be defined individually as brokers and agents and Irda will have to clarify the same.

A senior official with a private sector insurer said, “By bringing both under the definition of intermediary, the government set the ground for opening up Bancassurance that will allow banks to sell products of multiple insurers. The Irda will now have to come out with a guideline relating to the same. However there are some who do not entirely agree with this and say that they would wait for Irda’s guidelines.”

“We will have to wait for IRDA to define who will act as what. However, the change in ordinance as of now means that while earlier the insurer was answerable for the errors and omissions of corporate agents, now they themselves will be answerable for the same,”said the head of an insurance company who did not wish to be identified.

The CEO of another private sector general insurance company said, “The power now rests with the regulator and Irda will have to come out with a guideline clarifying the scope of brokers, corporate agents and agents.”

In August 2013, Irda had come out with a notification allowing banks to get licensed as insurance brokers making it possible for banks to migrate from a corporate agency structure to broking but despite the enabling regulations, no bank has till date migrated.