IRDA SETS UP COMMITTEE TO EXAMINE INSURANCE DISTRIBUTION

India’s Insurance Regulatory & Development Authority (IRDA) has established a 10-person committee to examine the workings of the various distribution channels for insurance that have evolved significantly over the past few years. The committee, headed by ex-Life Insurance Corporation chairman N M Govardhan, is scheduled to submit its report by the end of the year. Business Line India cited a committee member as saying that “it has been observed that some practices have crept into the system in terms of remuneration or reimbursement of expenses or incentive schemes of the agents. So, in order to ascertain whether they are in conformity with the provisions of the Insurance Act and their impact on the acquisition cost, the IRDA has felt the need for a detailed examination and that is why the committee has been constituted”. The committee will review the system for licensing corporate agents, the bancassurance model, micro-insurance distribution and the referral system. It will pay particular interest to the current commission structure. IRDA chairman C S Rao told the Economic Times that “the Authority feels that there is a need to study and ascertain the manner in which these channels have been functioning, their efficacy, their cost effectiveness, their weaknesses and also make recommendations on the changes required to make them effective, professional and accountable and serve the interests of the insured and facilitate provision of services all over the country in a cost-effective manner even for low-priced insurance”.