India Post to distribute Insurance Polices

Finally, the largest network with maximum reach has been roped in to distribute insurance policies in India. Department of Post (DoP) has been allowed by IRDA, the insurance watchdog, to sell insurance policies of multiple insurance companies.

This has been a result of a study undertaken by an expert committee on 'Harnessing the India Post Network for Financial Inclusion' which had recommended that the low cost platform of India Post be used for strategic partners like microfinance institutions (MFIs), mutual funds and insurance companies.

The sheer size of the network and its reach is substantiated by the following facts:

• Over 155,000 branches - twice as large as the outreach of all commercial banks in India put together
• Nearly 16 crore people use India Post
• Savings as on March 31, 2007 - Rs. 3,23,781 crore
• Deposits in savings bank account - Rs.16,789 crore

The DoP across India has been divided into 22 postal circles and now each circle is treated as a separate unit and will be allowed by IRDA to tie up with 2 non-life insurance companies, 2 life insurance companies, 1 agricultural insurance company and 1 stand alone Health Insurance Company for this purpose.

However, IRDA has disallowed the Head/Corporate Office of India Post to engage in the distribution of the insurance products of any insurance company ("in its individual capacity it shall not obtain license to act as Corporate Agent of any insurance company")

An excellent alternative:

With the opening up of this new distribution channel, it provides an excellent opportunity for insurance companies, busy chasing banks for distribution partnership, to tie up with India post. Insurance companies are facing a scarcity on this front with successful and large banks already engaged. This distribution arrangement will provide a low cost avenue with a wider reach for insurance companies, at the same time proving to be a new source of income for department of posts.

Now the fight would be for prime circles (especially in metropolitan areas) with cap on the number of companies that each can tie up with. In the case of metropolitan areas, as noted by IRDA, the head of Circle may approach IRDA for prior approval of further division in the circle as separate units to obtain licence to act as corporate agent in view of the large population. The head of the circle would be deemed to be the corporate insurance executive (CIE) — the key executive responsible for all insurance agency dealings.

One of the interesting points to be noted here is that the regulator has barred India Post from selling customer data to insurance companies under some referral arrangement.