In a practice that violates the industry regulator’s guidelines, life insurance companies have been roping in a host of intermediaries as commission agents to tip them off on prospective customers.
Insurance firms have enrolled housewives, students, chemists, chartered accountants, tax planners, industry Websites and even your nearby grocery stores to generate “leads” that turn into deals, say sources connected with the development.
Rahul Aggarwal, CEO, Optima Insurance Brokers said, “All insurance companies are following the lead generation model.”
But that is illegal, acoording to the Insurance Development and Regulatory Authority of India (IRDA).
"The insurance companies are exploiting the lacunae and gaps in the IRDA circular allowing the referral model between banks and insurers,” IRDA chairman J. Hari Narayan told Hindustan Times.
“Besides, insurers are also exploiting the clause in the advertisement regulations. We will be taking measures to curb this practice soon."
S.B.Mathur, secretary-general of the Life Insurance Council, the industry association, said,“I don’t know how this model works. This (paying lead generators) is not allowed by IRDA. Commission can be paid only to a licensed agent. There is no concept of a fee.”
Mails sent by Hindustan Times on the issue to ICICI Prudential Life Insurance, Tata-AIG Life, IDBI Fortis Life did not elicit any response despite constant reminders. Executives in some other insurers confirmed the practice, but did not respond officially.
A response from Tata-AIG Life said, “We regret we will not be able to participate in your story.”
Even Websites can turn lead generators in a practice that industry officials say forms part of a new business model. A Website shares data on its visitors with a private insurer which in turn puts its sales team on the job.
“The insurance company pays us a onetime fee only on conversion to business depending on the premium slabs,” said the CEO of an insurance Website.
He said the site also cut down hiring and training costs for the insurer.
The CEO of a private insurance company said, “Insurance companies are looking for new ways to reach customers,” and added that in-house relationship managers set up channels to tap the new network of intermediaries.