Cracking the whip on insurance agents,the Insurance Regulatory and Development Authority (IRDA) has proposed to cancel the licence of agents,if 50 per cent of the policies sold by them are not renewed annually.
Where average annual persistency ratio is less than 50 per cent,the agency licence would not be renewed, said a draft note issued by the regulator. This is an attempt to clamp down rampant mis-selling in the insurance industry.
Mis-selling refers to sale of a financial instrument without fully disclosing the nitty gritties of the policy to an investor. In its proposal on persistency of life policies,IRDA has said that the minimum first-year premium income to be procured by an agent will be Rs 1,50,000 per annum and the minimum number of policies per agent shall be 20 per annum. In case an agent fails to meet one of these two conditions,he will have to achieve proportionately more in the other norm to make up for the shortfall,it added. It also does not want spouses and close relatives of employees of insurers as agents.
In the last five years,persistency in the life insurance business has been on the decline,it says and has attributed this mainly to mis-selling. Persistency is the percentage of business retained without lapsing or being surrendered. There are several causes for the decline in persistency that are linked to agents. The primary one is mis-selling, said IRDA in the note.