India Law News: Insurance Agents Face Ban

In Mumbai, on June 8, 2010, the Insurance Regulatory and Development Authority (IRDA) canceled the licenses of 4,261 corporate agencies. The agencies were engaged in selling general/life insurance products. Are you wondering why such a staggering number of agencies were cancelled out of the blue? The authority is reported to have done so because their licenses needed to be renewed since March 31, 2010.

J. Hari Narayan, the chairman of the IRDA, said, “The agencies did not come for renewal and their licenses have been withdrawn.”  The IRDA has even cautioned insurers and general public as to avoid having insurance transactions with them.

India Law News: Why Did Agencies Not Renew Licenses?

The corporate agencies that restrained from renewing their licenses did so because of either of the following two reasons:

• They have got into new tie-ups with insurance companies.
• They have changed the model to referrals which do not need any such license.

An official who works as a corporate agent with a bank said, “We have not renewed our license as we have entered into a referral arrangement.”

According to experts, the referral model is more flexible and simpler. On the other hand, there are stringent norms involved in arranging a license to be eligible to sell insurance products.

India Law News: Who will help Loyal Customers?

Loyal customers are sure to ask, “Who will help us?” When a corporate agency calls off its agreement with an insurer and gets into arrangements with other insurers, this question is natural. Those who are associated with the corporate agencies feel that this does not impact old customers as IRDA has clear guidelines on that. An official is quoted as saying, “In such cases, we have a dedicated person taking care of all queries in relation to the old insurer and that person then forwards it to a designated person in the insurance company for the same.”