Regulation of Insurance Intermediaries and Distribution Channels
Who may distribute
IRDAI licenses and regulates each channel separately:
- Individual agents - licensed and trained, appointed by insurers.
- Corporate agents - may tie up with up to three life, three general and three health insurers.
- Insurance brokers - direct, reinsurance and composite; act for the insured, not the insurer.
- Web aggregators - comparison websites earning commission; must disclose insurer rankings and commission structures.
- Insurance marketing firms - distribute products of multiple insurers through certified salespersons.
- Point of Sales Persons (POSPs) - sell only pre-underwritten, simple products.
- Surveyors and loss assessors and health TPAs - service providers licensed or registered by IRDAI, not distributors.
Rules that carry marks
Section 42D of the Insurance Act requires agent licensing; Section 64UM requires surveyor licensing. Commission is payable only to licensed intermediaries and only under a board-approved policy within IRDAI's expenses-of-management limits; Section 41 bars any rebate of premium or commission as an inducement. Intermediaries must follow KYC/AML norms, disclose conflicts of interest, maintain confidentiality, and must not sign proposal documents on the prospect's behalf.
Worked example
A corporate agent already tied to three life insurers signs a fourth. The three-insurer ceiling is a condition of its registration, so the arrangement is unauthorised and the registration is liable to be cancelled.
Traps
- Saying a broker represents the insurer (it represents the insured).
- Treating a TPA or surveyor as a distribution channel.
- Allowing a POSP to sell a unit-linked or underwriting-heavy product.
- Assuming commission caps sit in Section 40 alone; IRDAI's EOM regulations govern the aggregate.