Govt proposes major amendment to insurance act to open up agent ties

To enhance competition and broaden consumer choices, the government has proposed amendments to the Insurance Act that would allow agents to partner with multiple insurers across life, general, and health insurance segments. Currently, agents are restricted to tying up with just one insurer in each category.

If the proposal is approved, the Insurance Regulatory and Development Authority of India (IRDAI) must form regulations to implement the new framework. These regulations will need to ensure that there is no conflict of interest as agents expand their affiliations to multiple insurers.

Here are some of the key proposals:

• Insurance agents could tie up with multiple life, general, and health insurance companies.
• IRDAI will oversee the development of regulations to manage multi-tie-up agreements and mitigate potential conflicts of interest.
• Stakeholder feedback on the proposal has been invited until December 10, 2024.

The proposals are expected to significantly impact the Life Insurance Corporation of India (LIC), given the country’s biggest public sector life insurer’s heavy reliance on its agency network.

LIC, which boasts 14.4 lakh agents as of the first half of the fiscal year 2024-2025, derives over 95% of its business from agents.

An open architecture system could dilute LIC’s dominance by enabling agents to promote products from competing insurers, offering customers more options.