Indian insurance industry is gradually opening its wings. A metamorphosis from agent-driven model to multiple distribution channels.

The Indian insurance sector is experiencing cosmic changes with the entry of new entities after liberalization. Firstly it was new insurers, then Third Party Administrators (TPA) and now with Insurance Regulatory and Development Authority (IRDA) passing a regulation, brokers can now make their entry. The step has been taken by the regulatory authority in order to ensure the quality of service provided to the end customer by the insurance industry through multiple distribution channels. There is a great deal of enthusiasm in the sector after this regulation is passed. Many aspirants have already formed companies and are waiting for the license to be granted by IRDA in order to commence operations. IRDA Chairman, N Rangachary has promised to clear all the applications by the first half of November 2002 to make the festival of Diwali more happening for the enthusiasts. Vinod Sahgal, Consultant, JLT Group and Adviser, Confederation of Indian Industry opines, "Until now agents were the only source through which insurers sold and clients bought insurancethis still resulted in a representative of the insurer who sold the insurance products, brokers on the other hand will be the representatives of the insurance buyer and so will provide the facility of meeting the insurers on an equal footing of domain knowledge."

According to IRDA's regulation, there are four categories of brokers with varying minimum capital requirement (see box: Broker Regulation at a Glance). The minimum capital requirement for each of the categories has been set at these levels to ensure the quality of brokers coming into the markets and hence the quality of service provided to the end customer. Commenting on this, Sahgal says, "There are diverse opinions expressed with as many saying too little as there are those saying too much. It is a unanimous view, however, that the reinsurance brokers/composite brokers need to be financially sound and therefore require steep capital norms. The paid-up capital of Rs. 2.5 cr is reasonable for an aspirant with some office infrastructure available at start-up stage but could prove to be inadequate if the venture is starting from the ground up."

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