The Insurance Regulatory and Development Authority of India (IRDAI) has recently brought changes to regulations governing Insurance Marketing Firms (IMFs). These alterations are aimed at intensifying insurance penetration by facilitating a conducive environment. To this effect, the IRDAI set up a committee led by Suresh Mathur to make several recommendations, including alterations to net worth, expansion of the operational area for IMFs, and enrichment of product offerings.
New Regulations
The reintroduced regulations have implications for IMFs that intend to commence operations exclusively in one district. This is particularly relevant for those districts that are identified by NITI Aayog as aspiring districts or economically backward ones. In these cases, the net worth limit has been reduced to ₹5 lakh. Nevertheless, the base net worth remains ₹10 lakh for all other contexts. The rationale behind this adjustment is as per the Suresh Mathur committee’s observation that the ₹10 lakh norm was somewhat excessive for tier-II and III cities.
Furthermore, the number of districts in a state where an IMF can register has been raised to three, provided one of them is an aspirational district. Additionally, the recent amendments enable IMFs to establish ties with the Agriculture Insurance Company of India and the Export Credit Guarantee Corporation. This is over and above the existing norms that permit them to procure business for two life, two general, and two health insurers.
Under the updated guidelines, IMFs can solicit business for a wide range of products sold on an individual level, retail basis, inclusive of crop insurance for non-loanee farmers, and combination products. The list of permissible products also comprises property, group personal accident, term insurance policy and group health policies directed towards Micro, Small and Medium Enterprises (MSMEs).
| Net Worth Limit for Economically Backward Districts | Base Net Worth for other Districts | Number of Districts an IMF can register in a State | New Business Associations for IMFs |
|---|---|---|---|
| ₹5 lakh | ₹10 lakh | Three | Agriculture Insurance Company of India and Export Credit Guarantee Corporation |
About Insurance Marketing Firm (IMF)
An Insurance Marketing Firm is a relatively novel distribution channel devised to solicit or procure insurance products, including the distribution of a diverse range of other financial products. This process is enabled by employing individuals with the appropriate licenses to market, distribute, and service these additional financial products.
IMFs are authorized to sell other financial products like mutual funds, National Pension System (NPS), banking and non-banking financial products regulated by the Reserve Bank of India, post office savings schemes, and other products distributed by investment advisers licensed by the Securities and Exchange Board of India.