The Indian Insurance market has been divided into different parts as per the demographics. Many distributors take care of the insurance needs of people by providing life and non-life products through different distribution channels.
The Government of India has launched various schemes for poor strata but there is a gap in the insurance market because no one is there to cater for the needs of all the different segments.
To fill this gap in the Indian insurance market, the IRDA has introduced the IMF channel with a district-wise approach. Insurance Marketing Firms can sell all kinds of insurance products on an individual or retail basis.
In January 2014, IRDA on the recommendation of the ‘Govardhan Committee Report’ implemented the concept of an Insurance Marketing Firm. It allowed distribution companies to work with multiple businesses.
Based on the recommendation, IRDA constituted a committee to survey the Govardhan Committee Report to introduce a new distribution channel called “Insurance Marketing Firm (IMF)”.
After this IRDA publishes a “Exposure Draft” for comments and suggestions of stakeholders for improvements. Eventually, IRDA issued ‘Registration of IMF Regulations 2015’.
From time-to-time IRDA has issued a clarification on various aspects related to IMF channels such as name chosen by IMF, number of tie-ups, remuneration, and per day training credits of Principal Office (PO) and Insurance Sales Person (ISP).
● An IMF can be a Limited Liability Partnership (LLP), a Co-operative Society, or a Company.
● Registration of IMF is valid for 3 years and can be renewed 90 days before the expiry.
● The Insurance Officer (PO) will be responsible for regulatory compliance with the IMF. The PO can be a Director, partner, office or an employee approved by the authority.
● IMF can tie up with 2 companies each – life, General and Health.
● The office of IMF can be only open in one district at the time of registration renewal.
● Net worth should be 5 lakhs for one Aspirational district and 10 lakhs for others.
To achieve increased insurance penetration, the IMF was introduced and from the launch the number of IMFs has been increasing every year. In India, there are a total of 569 IMFs currently. How these IMFs are solving the problems of the business and clients with their top strategies is stated below.
As discussed above, an Insurance Marketing Firm can work with 6 different businesses and sell multiple products of insurance companies, and other financial products:
● Mutual Fund (SEBI)
● Pension Products (PFRDA)
● Other Financial Products (SEBI Licensed Investment Advisors)
● Banking/Financial products of Banks/ NBFC (RBI)
● Non-insurance products (Dept. of Posts, Government of India)
An IMF works differently from an Insurance broker, a broker can sell products of one company only. On the other hand, the IMF can sell multiple products and have more accountability towards its clients.
IRDA has introduced the IMF Channel to fill the gaps in the untapped market with a district-wise registration approach. And they do it because an IMF can sell all kinds of insurance products on an individual level or retail basis.
They can market products like- Property, Group Personal Accident, Group Health, Group Saving Linked Insurance Schemes (LSLI), and Term Insurance Policies. Other than selling financial products, IMF can provide servicing activities to insurers and back-office servicing activities as well.
IMF is fully equipped to provide financial planning to clients by providing suitable insurance/ Financial products through its ISPs and FSEs. And this is supposed to take root and expand in every district of India.
Creates Trust-Based Relationships with Clients
An IMF is allowed to solicit and procure financial products of Banks, Mutual funds, post offices, etc. It helps clients with financial matters and also educates them on their financial needs and the product available in the market.
This trust-based relationship turns into the sale of multiple financial products. An IMF has the potential to earn and retain clients by providing them with a complete financial solution. Also, it can expand its business by cross-selling financial products.
These are some strategies which are used by Insurance Marketing Firms to solve the problem of insurers and businesses. The Spread of insurance and bringing all insurance and financial products under one roof was the approach of IRDA behind launching the IMF. And it looks like the IMF is working as per the norms and bringing change.
Also read: The Ultimate Guide to Making Your Career as a Mutual Fund Distributor