Irda issues draft guidelines for insurance marketing firms

An insurance marketing firm will be allowed to market insurance policies along with other financial products such as mutual funds 

 

To be an insurance marketing firm, a company will need to have at least Rs10 lakh of net worth at all times. Photo: Pradeep Gaur/Mint

 

Mumbai: Paving the way for a new distribution channel, the Insurance Regulatory and Development Authority (Irda) issued draft guidelines for insurance marketing firms on Wednesday.

An insurance marketing firm is an entity that 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.

To sell these products there will be two kinds of licensed individuals: an insurance salesperson, who will be responsible for soliciting and marketing insurance products alone, and a financial service executive, who will handle other financial services, such as offering financial advice, sale of mutual funds and the national pension system, or NPS.

These licensed individuals will have to obtain the necessary qualifications and licences from the respective regulators. To become an insurance salesperson the individual needs to have passed Class 10 and needs to clear the insurance brokers examination. Insurance agents are not eligible to become insurance salespersons, and the latter can’t cross over to become agents unless their licences as salespersons are active.

Financial service executives will need certification from regulatory bodies. For instance, to sell mutual funds, they will need to be certified by the Association of Mutual Funds in India (AMFI). For distributing NPS, they will need to be certified by the Pension Fund Regulatory and Development Authority (PFRDA), and for sale of financial products regulated by the Securities and Exchange Board of India (Sebi), they will need to obtain registration as investment advisers under the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013.

In case of insurance, salespersons will be involved in soliciting insurance policies, but their remuneration will not be commission-based. According to the draft rules, they would be paid a fixed amount and a performance incentive that may be over and above this. The role of the salespersons will lean more towards being a broker in the sense that they will need to keep the interest of their customers paramount. 

 

NITESH KUMAR SINGH

PGDM 2ND 

SOURCE- LIVEMINT