India’s insurance regulator IRDA is now looking to regulate online insurance aggregators, and, through the insurance companies it regulates, define the terms under which web based insurance aggregators operate, including the business model and renumeration, and will force the industry to switch from a cost-per-lead model to a cost-per-sale model. Some provisions we culled out from the draft guidelines for web based insurance aggregators and insurance companies in India, followed by our comments:
1. Only Approved Web Aggregators: Only IRDA approved web aggregators can generate insurance related leads for insurance companies. The IRDA shall grant approval for a period of three years to the web aggregator. The Authority may appoint one or more of its officers as an inspecting authority to undertake inspection of the premises of the web aggregator to ascertain and see how activities are carried on, and also to inspect the books of account, records
2. Minimum Net Worth: The web aggregator shall have a minimum net worth of not less than rupees fifty lakhs at any time during the previous three consecutive years. 3. At no point of time of its functioning, a web aggregator shall have net worth below rupees fifty lakhs.
3. Deal terms: Insurer/Broker shall enter into an “agreement” with the web aggregator approved by the authority which shall necessarily include details relating to, among other things, the Fee/Remuneration for the leads to be shared. The agreement shall be valid for a period of three years from the date of grant of approval by the Authority.
4. Lead Limits: If the client evinces interest in buying insurance but does select an Insurer, then the lead may be transmitted to no more than five Insurers in the same class of insurance business, or to more than one Broker. The same lead cannot be shared with both. Web aggregator shall transmit the data of clients to Insurer/Broker within five days of the client’s visit to the web site.
5. Payment terms: No advance payments. Payments shall be made to web aggregators only towards such leads that result in the sale of a policy. The fee for the lead shall not exceed twenty five percent of the commission payable on the first year premium sold on the basis of the lead obtained from the web aggregator. The Broker shall pay a fee not more than twenty five percent of the Brokerage receivable on the first year premium sold on the basis of the lead obtained from the web aggregator. The insurer/broker shall not pay any fees for renewal, or towards incidental web aggregator costs such as maintenance of the data base, infrastructure, training, entertainment, development, communication, advertisements, sales promotion etc.