The Insurance Regulatory and Development Authority (Irda) had proposed that insurance companies could tie-up with common service centres (CSCs) to act as insurance brokers to sell life and general insurance policies. However, sector officials said CSCs had not yet begun to sell policies, as companies were still in talks on how to use this network.
“Companies, especially in the life insurance space, are not in a rush to tie-up with CSCs, since we do not know what will be the exact model of their functioning,” said a senior life insurance executive. The official added since CSCs would also be dealing with other documentation of people in smaller towns, there was a risk of misuse of customer data.
CSCs are a part of the National e-Governance Plan. The Centre plans to roll out over 100,000 CSCs across the country with a focus on rural areas. These CSCs are aimed at providing high quality and cost-effective video, voice and data content and services in the areas of e-governance, education, health, tele-medicine, entertainment and other private services. The CSCs will offer web-enabled e-governance services in rural areas. They can offer application forms, certificates, and utility payments such as electricity, telephone and water bills.
Though insurers agree that CSCs would be able to aid in deeper penetration of rural markets, they would only be selling simple products. A senior executive of a large private general insurance company said that the insurance companies will have to devise specialised products for this channel. “Though the regulator has encouraged us to take advantage of this new distribution channel, we are going slow on this channel. We are yet to formally tie-up,” said a state-owned insurance company official.
At a time when the insurance regulator has placed huge emphasis over the anti-money laundering (AML) norms, insurers are also concerned about using this channel, as CSCs would deal with cash. The chief distribution officer of a mid-size private life insurance company said they have already expressed their opinion to Irda about dealing with CSCs on the back of tough AML norms.
“We do not have any background of who are the people part of each CSC. Since they handle other financial services like telephone bill, electricity bill payments which involve continuous cash transactions, we have to be doubly sure of how the AML practices are being standardised in the CSCs, before entering into any tie-ups,” he added.
Irda had asked insurers to develop products to be marketed exclusively through CSCs and file these products with the regulator for approval. In its guidelines on the CSC model, Irda had said these products shouldn’t have a sum assured exceeding Rs 2 lakh (except motor insurance), per life or risk.
In its regulations, Irda said for solicitation of insurance business, CSCs would have a rural authorised person (RAP), who would have to complete 20 hours of theoretical training from a recognised institution and, subsequently, undergo an examination. The RAP would assist customers in selecting policies according to their needs. He/she would also provide detailed information about customers to the insurer and offer customer servicing services. For a CSC special purpose vehicle to become an insurance intermediary, it would have to apply for a licence from Irda. This licence would be valid for three years, after which it can be renewed for another three years.
The CSC public-private partnership model envisages a three-tier structure — the CSC operator, the service centre agency (responsible for a division of 500-1,000 CSCs) and a state-government designated agency responsible for managing implementation across the state.
Insurance companies have said the CSC model would reduce distribution costs about 30 per cent in rural areas.
The regulator has also asked insurance companies to pay Rs 20 lakh each to the CSC e-Governance Services India Ltd, a special purpose vehicle (SPV), which has been set up to offer services through the CSC.
The regulator has said the CSC-SPV on-boarding corpus fund would be set up with the fund from each insurance company, which has entered into an agreement with the former for distribution of its products through CSCs. The insurer signing this agreement was to pay Rs 5 lakh by March 31 this year as the first instalment. However, no major tie-ups have been forged till now.