Plans

INSURANCE companies had a guarded response to the guidelines of the Insurance Regulatory and Development Authority (Irda) for benchmarking performance of individual agents, but most of them agreed that customers will be biggest beneficiaries of this move.

Some insurers said it might become tough for many agents to attain the targets set by the regulator.

Irda on Friday issued a new set of guidelines, effective from July 1, which said individual agents must retain half of their clients for the next three years and at least three-fourth of them beyond that time frame, failing which they will not be able to get licences renewed.

The guidelines also stated that if any agent is no longer active or his/her licence has been cancelled, the insurer will have to appoint a new agent to cater to all of his policyholders.

While the overall response from the industry to the guidelines was positive, few of them did express some concerns.

“From a normal 50 per cent persistency ratio (renewal of policies by policyholders), which is generally maintained by most agents except for a few non-active agents, a sudden jump to 75 per cent will be difficult for many agents to attain. Maintenance of persistency does not depend solely on the agent,” said Gorakhnath Agarwal, chief actuary with Future Generali India Life
Insurance Company.

However, from a customer’s point of view it is not very clear whether the new agent will be allocated, where it is required, as per the policyholder’s request or as per the insurance company’s convenience. Industry experts said ‘orphan policyholders’ will definitely be given a chance to choose his/her own agent for the remaining tenure of a policy.

Generally, Irda issues licences to agents for three years.

In case the agent misses the target ratio, he will still be allowed to do business and earn commission for the remaining part of the tenure
but his license will not be renewed when it comes up for renewal with the insurance company.

The guidelines are targeted at reducing the number of cases being surrendered by investors due to misselling or unsatisfactory services. At the same time, these norms also focus on checking policy lapses.

“It will improve commitment levels of the agency force and will prove hugely beneficial to insurance companies, agents and customers. Policyholders can expect better services as insurance companies will invest more in better equipping the agency force —
both in terms of knowledge as well as advisory capability," said Suresh Agarwal, executive vice-president with Kotak Mahindra Old Mutual Life Insurance.

Premature policy lapses and mid-term policy surrenders mean the customer has either willingly or unwillingly chosen to discontinue a policy. The reason of deliberate discontinuation can be higher returns from other similar investment products or lack of understanding about the benefits of product. There can also be some uncontrollable factors behind policy lapses, such as job loss.

"We welcome any decision that helps protect and safeguard the interest of the policyholder. As a routine, we maintain 80 per cent persistency level for agents and 85 per cent for employees in the 13th month as one of the qualifying criterion for all reward, recognitions and promotions. As a result, Max New York Life has maintained a conservation ratio of more than 80 per cent for the past four years," said Rajender Sud, director and head of agency distribution at Max New York Life Insurance.

The Irda guidelines do not apply to corporate agents. "Although corporate agents have to go through a stringent and strict process to obtain their licences, we may soon expect similar guidelines for them as well," Agarwal said. Irda has also barred insurers from providing licences to the blood relatives of their employees.