ANNUAL REPORT 2007-08
The image of the profession of Agency too suffers a setback since the public in general and prospective agents in particular perceive it as lacking in stability, thus making it more difficult for insurers to find good agents. It is therefore in the interest of all the stakeholders to work on reducing the turnover of agents.
While there were 2315 corporate agents at end March 2007, the number has increased to 2415 at end March 2008. Of this, 2070 were for the private insurers while the remaining belonged to LIC.
During the year 2007-08, 19 broking licenses were issued, of which 16 are direct broker licenses, one Composite broking license and two reinsurance licenses. Licenses for 35 brokers were renewed. The total number of licenses issued as on September 10, 2008 are 281, of which 242 are direct brokers, 33 are composite brokers and 6 are reinsurance brokers and the state-wise distribution of licenses is at Annex VIII. The number of licenses valid as on 10-09-2008 is 265.
Deviations from the provisions of Regulation 25 by not maintaining the books of account on accrual basis and keeping the statements, documents, etc at its Head office.
Non compliance with Regulation 26(1) as to the submission of half yearly accounts by not adhering to the stipulated time limit.
Not having proper internal control systems as per Regulation 27.
Inter group and related party transactions which were not disclosed in accordance with the Accounting Standard- 18 and payments were found in excess of what has been approved by the Board.
Diversion of funds within the group companies which
attract Provisions of Regulation 34(2) (Insurance Brokers) Regulations, 2002.
Payment of premium on behalf of the Client which indicates inducing clients by offering credit facility.
Inspections were conducted on 17 broking companies during 2007-08. One license was cancelled and five voluntary surrender of license were accepted. During inspection, the following observations were made in some case and appropriate actions initiated:
Violation of the Regulation 9(3) as to the requirements
for soliciting and procuring the insurance business.
The geographical spread has increased and broking companies have sought licenses in smaller towns like Bharuch, Surat , Baroda, Rajkot,Thrissur,Indore, Ahmedgarh, Nanded, Udaipur, Varanasi etc., In addition, many have expanded their branch networks, thereby making services available in large number of B and C category towns.
Channel-wise New business Performance
Breach of Regulation 21 as to the code of conduct on matters specified under clause 3(b) of Schedule – III of the IRDA (Insurance Brokers) Regulations, 2002 by utilizing services of consultants, who are not on the employees roll and paying consultation fee to them for various services which include risk assessment, lead generation, technical know-how, staff training etc
Not fully complying with the provisions of Regulation 24 as to maintaining continuity of Professional indemnity policy throughout the validity of the license and limit of indemnity in the ratio of 1:1.
The year 2007-08 witnessed a further shift away from the individual agency channel. The new business premium procured through individual agents in 2007-08 was 83.75 per cent as against 88.62 per cent in the year previous to that.
The share of new business conceded by the individual agents was picked up mainly by the corporate agents and direct selling.