Types of insurance agents

At the time of shopping for a refrigerator. Would you go to a store that sold only a single brand refrigerator? Or would you check the store that sold refrigerators from various manufacturers?

Similarly, would you buy insurance from Insurance Agents representing one specific company? Or the Insurance Agent who can offer you insurance from several different companies?

You may be wondering what the real difference is between these insurance agents? This shows the difference between the two types of insurance agents. They are known as Captive and Independent agents.

Insurance is sold by two types of agents. Independent agents are self-employed. They represent several insurance companies and are paid on commission only. And, on the other hand, are Captive or Exclusive Agents. They represent only one insurance company. They earn by salary or commission or both. Insurance companies that use such Captive Agents are called Direct Writers.

Types of Insurance Agents

Insurance agents: WealthBucket

Most people don’t understand the contents of their insurance policy. Let alone know the different distribution channels for the product itself. And they are quite complicated for most of the consumers, not only you.
Insurance Companies don’t have warehouses or delivery trucks or shelf life. These companies and policies are heavily regulated. in India, the regulatory authority for the insurance sector is IRDAI, Insurance Regulatory and Development Authority of India.
This article intends to explain the differences between the three main distribution channels for insurance:

1. Independent,
2. Captive, and
3. Micro Finance.

Each has its own advantage and disadvantage.

Individual Insurance Agent

A person can become an individual agent, after taking the requisite training. Clear a certification examination. Then he/she gets licensed by IRDAI to sell insurance policies to the public. And provide services related to insurance. Including assisting at the time of a claim. This license may be for Life Insurance, General Insurance or both. One Insurance Agent can sell and represent, one particular life insurance company and one particular non-life insurance company, at the same time.

So the Individual Insurance Agent maybe selling:

1. Direct Life Insurance,
2. Direct Non-Life insurance or General Insurance,
3. Composite Insurance (Both Life & Non-Life).

Additionally, an agent can also represent one particular standalone health insurance company. But none more than one.

Most insurance agents also represent other financial sector entities or investment options, at the same time. The instruments may be Mutual Funds Investment, Post Office Schemes, etc.

Independent agents are not employees of the companies they are representing. These agents, generally, get paid a commission (or percentage) of the premium amount of your policy by the insurance company they place you with. And a specific commission on all the subsequent premiums, as well.

There won’t be any specific examples of these types of agents you would be aware of by name recognition. These are, generally, available in every locality, market, and/or society.

At the time of purchase, you must verify the credentials of the agent by asking for his license and identity card.

Captive Insurance Agent

Captive agents can sell insurance for one specific company, only. This particular insurance company is, typically, a “name brand” company.

A Captive is a closely held Insurance Company. The main objective of its establishment is to insure the risks of its parent company and affiliated groups. Day-to-day operations are controlled by the owner company, which will also be the principal insureds. These day-to-day operations include underwriting and claims decisions as well as an investment policy of the captive.

Captive Insurance means a subsidiary corporation incorporated to provide insurance to the parent company and its affiliates. A Captive Insurance company represents an alternative for many corporations and groups who want to take financial control and manage risks. By underwriting their insurance rather than paying premiums to third-party insurers.

Captive Insurance Companies are responsible for:

1. Collecting Premiums,
2. Issuing insurance or reinsuring a fronting company,
3. Setting aside reserves sufficient to pay potential claims,
4. Issue dividends to insureds (mutual) and owners,
5. Manage the investment policy of the captive.

What is Covered under Captive Insurance

The focus of the Captive Insurance Advisor Company is to economically assume the risk that is currently self-insured. These may be increasing deductibles on existing policies, assuming all or some of the risk of traditional insurance, or just taking on the risks of existing deductibles and exclusions. Numerous acceptable risks are commonly insured through captives includes the following:

Property: This type of coverage includes the protection of fixed assets. Such as buildings, equipment, plant. Vehicles – own damage and the third party. Stocks. Work-in-progress, all risks and contents, business interruption and consequential loss. Natural catastrophes (including earthquake, typhoon, wind storm, tornado, and flooding).E-commerce (especially disruption of production and service following a virus), etc.

Casualty: Under this type of insurance. Worker’s compensation, employer’s liability, general liability, auto liability, public liability, product liability, product recall, medical malpractice, environmental, accident and health, life cover, etc. are included.

Other insurances: Sectors such as life, health, employment practices, punitive damages, disruption of supplies are covered.

Micro Finance Insurance Agents

According to IRDAI, those Agents or Entities, already licensed for soliciting the insurance business or appointed as referral company are not eligible to be appointed as micro-insurance agents.

So who, exactly, are Micro Finance Agents?

There is no proper definition for this available. So let us try to understand the term with the help of its coverage, etc.

According to IRDAI, A micro-insurance policy is like a Life or General Insurance policy. The maximum permissible limit for the Sum Assured is Rs 50,000.

A Life Micro-Insurance is:

• A Term Insurance contract with or without return of premium,
• Any Endowment Insurance contract, or,
• A Health Insurance contract,
• They can include an accident benefit rider, and,
• It may be on an individual or group basis.

There is flexibility in the regulations. So the Insurance Agent can offer composite covers or package products that include life and general insurance covers together.

A General micro-insurance product may be:

• Health Insurance Contract,
• Any Contract that covers belongings such as,
• Hut,
• Livestock,
• Tools or instruments, or,
• Any personal accident contract,
• These, too, can be on an individual or group basis.

Microinsurance business is done through the following intermediaries:

1. NGO’s (Non-Government Organisations),
2. Self-Help Groups, and
3. Micro-Finance Institutions.

This special category of insurance policies was created by the IRDAI, to promote insurance coverage among economically vulnerable sections of society.

POS (Point of Sale) Agent

IRDAI has allowed the POS agent to sell basic insurance products. The purpose is to increase insurance penetration in the country.

Because these individuals have lower qualifications and training, as compared to other insurance distributors. IRDAI has allowed these individuals to sell only basic insurance products, which don’t require a lot of underwriting.

Therefore, the products that require very little underwriting. Because they are based on information provided by the prospect. such as motor insurance, travel insurance, and personal accident insurance Also, such insurance policies are automatically generated online by the system.

The intervention required for these products is minimal. Therefore, the training and exams for such persons could be of a lesser degree than those for a full-fledged distributor.

POS Insurance Agent can be engaged either directly by insurers. Or by intermediaries such as corporate agents and insurance brokers. The minimum educational qualification, required, is Class 10 and their age should be 18 years minimum. Earlier, the IRDAI had appointed the National Institute of Electronics and Information Technology (NIELIT) to conduct the examination for their certificate. But, later, IRDAI removed this condition for the life insurance industry. Therefore, training and certification from NIELIT are no longer mandatory.

If you want to explore investment options. It is advisable that you take guidance from professionals. Log on to WealthBucket. We make investing profitable. Out of the various services on offer, a few are Equity Mutual Funds, Debt Mutual Funds, Income Funds, etc.

Call now at +91 9999379929. Email your queries at contact@wealthbucket.in.

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