Sectoral regulator IRDA has proposed that the licences of life insurance agents be cancelled if they fail to annually renew at least 50 per cent of the policies sold by them, a move that would discourage misselling of products.
"Where average annual persistency ratio is less than 50 per cent, the agency licence would not be renewed," the Insurance Regulatory and Development Authority (IRDA) said in its draft on persistency of life insurance policies.
It further said that the minimum number of policies per agent shall be 20 per annum and the minimum First Year Premium income to be procured by an agent would be Rs 1,50,000 per annum.
The regulator further said that spouses and close relatives of employees of insurers shall not be engaged as agents by insurers.
In the last five years, there has been a declining trend of persistency in the life insurance business, a matter of concern.
Persistency is the percentage of business retained without lapsing or being surrendered.
"There are several causes of decline in persistency that are linked to agents. The primary one, as we have already seen, is mis-selling," IRDA said.
IRDA said the proposals would be a step forward in protecting the interests of policyholders, who, in the ultimate analysis, stand to gain if persistency is high.
IRDA has asked the Life Insurance Council, the General Insurance Council, insurers, consumer organisations and the general public to submit their comments on the proposals on or before July 31, 2010.