SUCCESS OF CORPORATE AGENTS IN MARKETING OF INSURANCE PRODUCTS

Submitted to: Dr. A. V. Narasimha Rao Visiting Faculty NALSAR - IIRM

Submitted by: Soumya Sukumar R. No: FS10 029 ML-FS&CM

CORPORATE AGENT
Corporate agents function as agents for various types

of businesses or for a government agency.

The corporate agent is a trust company that receives specifically assigned rights and privileges from the corporation or government entity. Handles financial matters on behalf of the client on

which they get paid a certain amount known as the

commission.

CORPORATE AGENT
A firm.

A company formed under the Companies Act, 1956.

A banking company as defined under the Banking Companies Act, 1949. A regional rural bank established under the Regional Rural Banks Act, 1976. A co-operative society/ a co-operative bank, registered under the Co-operative Societies Act, 1912.

 A panchayat or a local authority. A Non-Governmental organisation or a micro lending

finance organisation covered under the Co-operative

Societies Act, 1912 or a Non Banking Financial Company registered with the Reserve Bank of India.

Any other institution or organisation which is specifically

approved by the Authority. Composite Corporate Agent means a Corporate Agent who holds a licence to act as an insurance agent for a life insurer and a general insurer.

LICENSING
An applicant desiring to obtain or renew a licence to

act as a corporate agent or a composite corporate

agent shall proceed as follows: 1. The applicant shall make an application to the designated person in Form IRDA-Corporate Agents-A-1. If the applicant, wants to be a composite corporate agent he shall make two such separate applications.

 2. The fees should be paid by the applicant.

Once the application along with the receipt of the payment is obtained by the designated person, he may grant or renew, a licence in Form IRDA-Corporate AgentsL-1 on being satisfied that the corporate insurance executive of the applicant: 1. Possesses the qualifications required.

2. Possesses the practical training.

3. Has passed the examination as specified.

 4. Has furnished a complete application in all respects.

5. Has the knowledge to solicit and procure insurance business. 6. Is capable of providing the necessary service to the policyholders. Period: Grant or renew within 3 months from the date of application.

If there is a delay or he rejects the applcation he should

inform the applicant about it giving valid reasons.

QUALIFICATIONS
The Corporate Agent should ensure that one of their main objects is to procure insurance business as a Corporate Agent.

The corporate insurance executive must be a 12th pass if he resides

in a place of a population of 5000 or more OR a 10th pass if he resides anywhere else. Shall not possess any disqualifications which are: 1. Minor. 2. Unsound mind. 3. Criminal. [5 years elapsed] 4. Fraud, dishonest or misrepresents.

PRACTICAL TRAINING
The corporate insurance executive must have at least

100 hours of training spread over 3 to 4 weeks in either

Life or General as the case may be. Where the CIE must be any one of these: 1. An Associate/Fellow of the Insurance Institute of India. 2. An Associate/Fellow of the Institute of Chartered Accountants of India.

 3. An Associate/Fellow of the Institute of Costs and Works

Accountants of India. 4. An Associate/Fellow of the Institute of Company Secretaries of India. 5. An Associate/Fellow of the Actuarial Society of India.

6. A Master of Business Administration of any Institution/

University recognised by any State Government or the Central Government. 7. Possessing Certified Associateship of Indian Institute of Bankers (CAIIB).

 8. Possessing any professional qualification in

marketing from any Institution/ University recognised

by any State Government or the Central Government.

EXAMINATION The CIE must write the pre-recruitment examination conducted by III or any other body recognized by the IRDA. On passing such examination a certificate must be issued.

FEES AND REMUNERATION

For issuing or renewal of license: A sum of Rs. 250 should be paid to the authority. To obtain Certificate: A sum of Rs. 500 should be paid to the authority. Every Corporate Agent shall be paid a commission as per provisions of Section 40 A of The Insurance Act, 1938.

Every specified person shall be an employee of the

corporate agent.

CODE OF CONDUCT
No corporate agent/ corporate insurance executive/ specified person shall: 1. Solicit or procure insurance business without holding a valid licence/ certificate. 2. Offer different rates, advantages, terms and conditions other

than those offered by his insurer.

3. Demand or receive a share of proceeds from the beneficiary under an insurance contract.

Despite having such stringent rules and regulations the corporate

agents to earn profits the corporate agents have been violating the code of conduct time and again by practicing Multi level marketing.

MULTI LEVEL MARKETING

Multi-level marketing (MLM) is a sales system where an agent earns commission not only on sales effected by him but also on the sales of each agent he recruits, though at a smaller rate. The chain of commissions continue with the agent on top of the

pyramid getting a small share of commissions from all the agents

down the chain. IRDA has come across instances where the MLM companies have

been positioning themselves as insurance providers instead of

insurance distributors. The best example of MLM company is Amway.

 The main deficiency is that the system is not structured to reward

customer service. Rather it focuses on encouraging agents into recruiting more agents under them so that they can earn an overriding commission. This concept of earning overriding commission is not accepted in the insurance business. Thus from a couple of years we have seen that the IRDA has cancelled many licenses of such corporate agents and the number

has reduced drastically.

The number of corporate agents is still reducing and is dying a slow death.

Rose Valley Chain Marketing System Ltd.

The Company sourced its business through Multi Level Marketing through persons who do not possess any certificate / License issued under Licensing of Corporate Agents Regulations, 2002. It is also observed that commissions are paid to the persons other

than specified persons.

According to the Guidelines the Company shall not charge an administration fee, service charge, or any other charge to the policy

holder insured through it. But as per evidences available with the
Authority, it is observed that the Company has charged a processing fee ,joining fee and admission fee.

 The corporate agent denied the charge and stated that their objective is to
penetrate into market with vast network and that they were in the process of appointing more Specific persons to sustain the pressure of their volume of business.

But it was evident from the main objects clause of their MOA which
includes chain marketing as one of their main objects. Also the corporate agent contended that the joining fee mentioned therein pertains to membership fee of land clubs, which is collected for onward transfer to their real estate business books. However, this contention is not supported by relevant documents. Thus it was established regarding the facts and documents of the case that the charges made against the corporate agent stand established. It will not be in interest of policyholders for M/s Rose Valley Chain Marketing System to continue to function as corporate agent.

Reduction of Corporate Agents

Commission Of Corporate Agents Through a few Insurance Companies

BAJAJ
YEAR
2008 - 2009 2009 - 2010 2010 - 2011

LIFE
476,52,00,000 412,54,00,000 290,82,27,000

GENERAL
45,16,76,000 48,73,76,000 33,81,68,000

RELIANCE
YEAR 2008 - 2009 2009 - 2010 LIFE 148,46,71,000 255,93,75,000 GENERAL 6,94,35,000 4,71,76,000

2010 - 2011
*Values rounded off

241,33,88,000

4,44,91,000

Comparison with other Players RELIANCE

YEAR 2008 2009 2009 - 2010 2010 - 2011

Agents:

2,107,644

2,291,044

2,056,310

Brokers:

390,366

135,743

64,209

Corporate Agency:
*Rs.000

2,413,388

2,559,375

1,484,671

SUGGESTIONS
Be persistent and do not pester. Follow up as quickly as possible. Treat the clients as first priority. Be their guide.

To put themselves in the shoes of their clients.

Ask for feedback. Keep in touch. Dont settle for mediocre. Follow all the rules and regulations.

CONCLUSION
The concept of corporate agency is dying a slow death. Since 2010 the regulations have been made more stringent because of which many corporate agents quit. Also MLM is the only way they can earn huge profits and

this will continue to happen.

The insurers are also starting to prefer other channels over this.

The future seems bleak and a lot of effort will have to be

put in to getting them back on their feet.