Operations of Intermediaries - Insurance Business and Market, Principles of Insurance Video Lecture | Principles of Insurance - B Com

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hello students let's study fundamentals
of insurance
this is unit 2 the lecture is insurance
intermediaries let's study the meaning
of insurance intermediaries insurance
intermediaries are brokers or agents who
represent consumers in insurance
transactions they are contracted with
multiple insurance companies so they
focus on matching their clients need
with the most suitable insurance
products now when we talk about
intermediaries they basically form the
distribution channel of the insurance
industry these brokers and agents
connect with many companies because he
supply of product as different into the
market they match the needs of the
customers with the policies they
generally sell in the market definition
according to irda that is the Insurance
Regulation Development Authority Act of
1999 under Section 2 1 F of the Act
states that intermediary of insurance
industry includes insurance brokers
reinsurance brokers insurance
consultants surveyors and lost Assessors
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now let's study the different forms of
intermediaries we have insurance agents
insurance brokers banker insurance
micro insurance agents see the different
forms of intermediaries insurance agents
are people who generally connect with
the insurance company and build the
clientele for them insurance brokers are
the Commission agents they work on the
basis of the Commission and the money
earned in the market for any company
Branka insurance is the bank company is
working as intermediary between the
insurance and the clients micro
insurance agents are for the better
penetration and for the rural segment
coverage their commission basis low but
they also form a part of the insurance
distribution channel now is the banker
insurance that is Bank Assurance is the
partnership or relationship between a
bank and an insurance company whereby
the insurance company uses the bank
sales channel in order to sell the
insurance products bank insurance is the
insurance company connecting the
customers you have the banks in the
middle and these banks are regulated by
both RBI that is the Reserve Bank of
India and I irda that is the Insurance
Regulatory Development Authority bank
insurance in India in the year 2002 the
banks of India were permitted to do
insurance business for the first time it
is regulated both by the Reserve Bank of
India and Insurance Regulatory and
Development Authority that is ADA as it
is a combination of banks and insurance
it is a win-win strategy for both
example SBI Life Insurance Company
Limited has a tie with SBI Bank that is
State Bank of Insurance has a tie-up
with the State Bank of India micro
insurance agents micro insurance or
micro agent was a channel in the
insurance industry that was developed
for a deeper penetration of insurance
into India however with smaller ticket
sized coupled with low Commission's this
channel has been a kind of a low
participation from the distributor's
micro insurance agent system has not
become very popular because the
commission paid are very low so even the
distributors are not taking much
interest to appoint these kinds of
agents so this is not becoming a very
powerful part of the insurance
businesses but still the agents and the
brokers do a very important role in
building insurance business for the
companies micro insurance agents build
distribution with low Commission's they
build a deeper penetration and these
micro insurance agent connect the
companies to the rural and to the
population basis which is generally low
density areas intermediaries is
supervisory authority sets requirements
directly or through the supervision of
the insurers for the conduct of
intermediaries intermediaries for this
purpose include insurance agents
corporate agents insurance brokers
insurance service loss Assessors and
third party administration in health
insurance so intermediaries they are a
kind of a powerful form of the
distribution channel this distribution
channel connects the clients with the
companies let's see the insurance
intermediaries first is the insurance
companies and here the intermediaries
work in form of agents corporate agents
brokers surveyors and loss Assessors and
third party administration
intermediaries they are an essential
area of supervision in the insurance
sector and we have a reputation risk or
a Prudential impact on the insurers
intermediaries serve as an important
distribution channel of insurance
industry they provide interface between
consumers and insurers so they're the
face of the industry they talk to the
clients sell the policies and help in
designing the innovative ideas and
products because they understand the
feedback from the customers and take it
to the company
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conduct of intermediaries their good
conduct is essential to protect
consumers and promote confidence in the
insurance market therefore there is a
need for supervision of intermediaries
intermediaries are legal entities
working into the market the bad
reputation can impact the business and
the reputation of the company so these
intermediaries are also regulated by law
let's see how first as the essential
criteria for these authorities the
Supervisory Authority requires
intermediaries to be licensed or
registered this is the provision of
Insurance Act section 42 prescribes the
policy guidelines for licensing that is
no broker can work in the market without
registration or a license which is
generally a kind of a requirement to
have a essential holding according to
section 42 issue of license authority
may determine by regulations to issue
license as intermediary insurance
intermediary that is section 42 d all
the intermediaries in the insurance
business sector are licensed and the
procedure for license is laid down in
the respective regulations so if you are
working in the industry without
regulation generally you will be
punishable under law profession and
knowledge the supervisory authority
requires intermediaries to have educate
general commercial and professional
knowledge and the ability as well as
having a good reputation
now the body that is guiding or that is
giving registrations that is the ADA
that s the Insurance Regulatory
Development Authority requires that the
agents must have knowledge and training
to do business in the market training
intermediaries respective regulations on
intermediaries prescribe qualification
training and pre licensing examination
criteria for intermediaries to ensure
that only person with adequate
professional knowledge they are involved
into insurance intermediation that is we
have search
criteria before you become an agent or
your a broker in the market what are the
criterias we will study in details let's
take the corrective action if necessary
the Supervisory Authority takes
corrective action including applying
sanctions directly or through insurers
and cancelling the intermediaries
license or registration when appropriate
so these regulatory bodies not only
impact the training and the
qualifications of the brokers in the
agents but they also have the power to
take corrective action that is if they
do wrong or they misbehave in the market
or the misconduct is reflected they can
cancel the license of the brokers and
the agents code of conduct is generally
prescribed regulations prescribed code
of conduct for respective intermediaries
the section what we do be in the
Insurance Act of 1938 and relevant
regulations prescribes actions for
violations which include penalty
suspensions and cancellations the Act of
1938 generally lays down the guidelines
for the misconduct and the misbehavior
of the agents where they can be punished
under law
safeguarding funds the supervisory
authority requires an intermediary who
handles clients money to have sufficient
safeguards in place to protect these
funds protection of these Frances
essential risk management policy the
section 64 5b mandates that the risk and
policy of insurance will commence only
after receipt of premium by insurer
further under provisions of this section
any intermediary who is authorized to
collect insurance premium shall deposit
with or dispatch by post to the insurer
the premiums are collected in full
without reduction of his commission
within 24 hours of the collection so
this section basically tries to manage
the risk and safeguard defines where
within 24 hours you have to report the
funding to the insurance company
brokers Regulation Act of 2002
regulation 23 of ADA that is the
Insurance Regulatory Development
Authority insurance brokers Regulation
Act 2002 prescribes the manner in which
money collected by insurance broker
shall be dealt and it ensures enough
safeguards with regard to the funds so
this is important that basically when
the agents collect money
first the fancifully have to be given to
the company and then the Commission can
come to them
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intermediary's roll the supervisory
authority requires intermediaries to
give customers information on the status
significantly and specifically whether
they are independent or associated with
particular insurance company and whether
they are authorised to conclude
insurance contracts on behalf of the
insurer or not it is important for the
brokers to give their introduction to
the clients to which company they are
associated is the basic requirement that
they should give in the introduction to
the clients and if the clients
understand them then only they can sign
the contract for him idle sales
practices under provisions of
regulations which prescribe code of
conduct for respective intermediaries
mandates that the intermediary shall
identify himself and the insurance
company of whoo he is an intermediary
code of conduct prescribed for insurance
brokers specifically in matters relating
to sales practices controlling fair
practices the Supervisory Authority or
other authority must have powers to take
action against these individuals or
entities that are carrying on insurance
intermediation activity without license
or registration section 42 of Insurance
Act of 1938 as per section 42 d 8 of
Insurance Act 1938 any person who acts
as an intermediary or an insurance
intermediary without holding a license
issued under the section 2 Act such
shall be punishable with fine so this
act basically gives you the requirement
of holding a kind of a valid license
section 42 of Insurance Act of 1938
further as per section 42 D
eight of Insurance Act 1938 any insurer
or any person who appoints as an
intermediary or an insurance
intermediary or any person not licensed
to act as such or transics any insurance
business in India through any such
person shall be punishable with fine so
this is only appointed people by the
company under particular sections that
is section 42 of the Act 1938 they have
the power to do business and if you work
without this licenses you generally
allowable to be punishable under law
regulation of 17 of aid that is
regulations 17 of insurance regulatory
Development Authority that is ADA
insurance and brokers provide for penal
action under act for any person who acts
as insurance broker without holding
valid license
this action is without prejudice to
initiation of any criminal proceedings
against the said person so this section
17 of ADA basically initiates that
license is essential and you generally
need to have a kind of a valid approval
from this Authority to work in the
business of insurance compensation
compensation is a systematic approach to
providing monetary value to employees in
exchange for work performed compensation
may achieve several purposes assisting
in recruitment job performance and job
satisfaction now because we are reading
insurance business it is important that
the intermediaries that is the brokers
and agents need payment also so what is
their pavement and what is the
compensation management or what is the
system let's see this in detail where we
have studied that this is a systematic
effort to give them wages and salaries
objectives is to recruit and retain
qualified employees to increase and
maintain model to determine basic way
and salary and to reward for job
performances that is what is the object
for objective for giving compensation is
to generally have employees who have
talent and they are retained in the
industry
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compensation is an integral part of
human resource management which helps in
motivating the employees and improving
organizational effectiveness
effectiveness in terms of attracting and
retaining talent motivating talent for
better performance and cost
effectiveness so if the insurance
industry has good compensation
management system is good brokers and
good agents will work for the industry
and the business will go high which will
give a national wealth factors affecting
compensation is mental requirements
physical requirements skill requirements
responsibility level working condition
that is the risk time in the his arts
you face how do we determine the
compensation of any industry people
basically depends on these skills
required to perform a particular job and
returns the professional ability of the
people who are associated with the
industry purpose of compensation for the
employer is to build a brand name for
attracting candidates motivating
employees for higher productivity and
performance retaining talent consistency
in compensation and provoking healthy
internal competition why the insurance
companies need to give good compensation
is to retain good employees and to build
a kind of a business potential or the
sales level which is required for the
performance of the basic competitor or
the basic business entity in the market
factors affecting compensation is
organizational affordability that
requires manpower planning sales and
salary ratio market rate for the talent
and the economic condition how insurance
companies decide their compensation for
the brokers and agents depends on the
prevailing economic conditions of
particular country and the salary is
decided in ratio to the sales generated
by each agent for employees compensation
is important to maintain a work-life
balance recognition as a tool for self
esteem and
for better quality of life now here
let's see the total a detailed structure
of compensation management where the
employee management generally is
important for the legal compliances for
image building branding consumer
satisfaction relationship management
building equity market for better
administration and for creating
efficiency in the market in direct
compensation relates to protection
programs of life insurance medical
insurance pension and Social Security
see when we manage compensation for the
intermediaries that is for brokers and
agents we have direct compensations and
we have indirect compensation so the
indirect compensation will be the
protection programs generally which are
implied for those agents also in form of
life and medical insurance to build
their pension and to build a kind of a
security for them pay for time not
worked that is holidays vacations and
sick leave these brokers in the agents
also get these indirect benefits working
in the industry services pre request
that is the recreational facilities car
financial planning and low cost lunches
which are associated with their business
direct compensation is the wages and the
salaries given to the brokers in the
agent that is the base pay is the wage
plus salary incentive payment requires
or basically it is built up by adding
bonus plus Commission plus stock option
plus profit sharing deferred payments
are savings plus stock purchase plus
annuity so this is the advantage that
how the intermediaries work into the
market this is the basic pay
compensation of the money mechanism
which builds the distribution channel
for the company and this is how the
clients connect to the brokers because
the brokers have the vested interest of
getting an effective compensation which
is designed by the insurance industry to
retain the workforce data compensation
refers to
the monetary benefits offered and
provided to employees in return of the
services they provide to the
organization the monetary benefits
include basic salary house rent Alliance
convent's Leave Travel allowance medical
reimbursements special allowances bonus
PF gradua t etc they are given at a
regular interval and at a regular time
indirect refers to non-monetary benefits
which is provided to employees in lieu
of services provided by them to the
organization they include paid leave car
transportation medical aides in
assistance insurance leave travel
assistance retirement benefits and
holiday homes on any standard policy
that you procure shall be paid for the
following commission rates 35% of first
year premium installments 7.5% of second
and third year installments and 5% of
every year till maturity of the policy
so this is the basic attraction that
this is the basic way why the industry
works in an effective and efficient way
that the brokers do have a profit
sharing in the business whenever they
give a premium to the company that is
they carry five percent of the share as
a part of the business and then even if
after retirement if they are not in the
business the premium and the interest or
the kind of the sharing will come to
them with five percent added to each
year and the furthermore the impact is
high like if they have a nominated
person and if the agent dies then the
benefits will be transferred to the kind
of the offsprings or the nominees the
intermediaries who work in the insurance
businesses give profits to the clients
they give profits to the companies but
they themselves all also have a kind of
a big impact in terms of savings and
returns they get payments in form of
direct commissions
they get indirect benefits in terms of
security
and the insurance coverage so this
business basically is located for the
agents and the brokers who generally
involve a lot of time with the companies
and sharing their kind of work as with
the clients also the businesses go
beyond working to relationship building
where the management is basically
related to the client aspect and your
customer relations are important for the
client sustainability when we study the
insurance business in detail we see that
the intermediaries who relate to the
kind of the crystallization of sales and
they do a business for the company both
are benefited the company gets enough
investments which roots back to the
national and the economic development
and the agents and the brokers get money
wages compensation and other security
this is how the insurance intermediaries
work in market with effective
compensation systems and with effective
management systems to crystallize sales
in the market
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now let's study the summary of this
lecture in this lecture we have studied
the insurance intermediaries and the
compensation system they generally get
intermediaries are important in the
sales business to crystallize the
insurance or the policy claims for the
company the clients generally are
dispersed now it is important then they
need to connect with the customers with
a planned meeting and try to negotiate
the terms for policy building these
intermediaries in form of banks micro
agents brokers consultants and surveys
work in the market for the benefit of
the company they crystallise the money
and build the wealth for the company
this wealth is important for the nation
and if wealth is important for the
nation the brokers and the agents are
also important for the country the
insurance business cannot run without
intermediaries the distribution channel
is important and it generally brings lot
of money for the company the agents have
to work for customer satisfaction
I hope these students must have
understood the impact of intermediaries
and compensation management Thank You
students
you