Why Is The IMF Channel Not Growing?

The IRDAI (Insurance Regulatory Authority of India) had last year launched a new and innovative distribution channel called the "IMF" or Insurance Marketing Firm. Unlike traditional agents, IMF's are permitted to distribute policies of two life, two general and two health insurance companies, along with a host of other products such as mutual funds and post office plans.

The move was welcomed as a necessary step in the right direction. Over the past decade or so, the Insurance sales profession has received its fair share of bad press - most of it warranted, I might add. The industry is replete with horror stories of mis-selling and conflicted advice that has resulted in the widespread destruction of customer value over the years. The IMF structure provides agents with a window of opportunity to evolve into financial planners by building a multi-product, advisory led architecture, which would certainly be in the long-term interest of clients.

Here's the problem, as per data released on the IRDAI website a few days back, a mere 63 IMF's have been registered as on date! Another 329 are in the "NOC received" stage of the funnel, implying that they are a few steps away from acquiring their licenses.

63 registered IMF's since a year and a half of the launch of an insurance distribution structure which has the potential to benefit clients. And that too, in a country with 80,000 registered Mutual Fund IFA's, 2 Million+ Life Insurance agents, and countless loan advisors (all prime targets for the IMF structure). Why, one would ask, is the initiative not taking off as planned?

Primarily, there's a general lack of awareness about the real benefits of migrating to the IMF structure. Most existing Life Insurance agents are content with their single-alliance architectures, blissfully selling traditional products and earning hefty first year commissions from their sales. Why would they go through the pain of incorporating a company, clearing the examinations, dealing with the paperwork, and perhaps even distributing products that have far lower inbuilt commissions? A concerted, industry-led push to educate existing distributors on the benefits of going the IMF route is the need of the hour. Better client relationships, deeper shares of wallets, increased trust with clients, more client stickiness and increased respect are just some of the potential positive outcomes that the industry can flout.

Secondly, the industry itself needs to ditch their "us versus them" approach and join hands towards the collective facilitation of the IMF structure. To borrow from clichéd management lingo, "co-opetetion" is what the industry needs. I was recently privy to interesting piece of information: apparently, insurers are watching the NOC list on the IRDAI portal like hawks, waiting to pounce on those who have received NOC's and empanel themselves as one of the six companies that they can associate themselves with! Talk about missing the woods for the trees. Instead of putting in efforts to expand the size of the pie, insurers seem to be content (at least for the time being) with settling for small crumbs from the already existing small pie of 329. Perhaps it's time the Life Insurance Council mobilized collective, CEO level support from insurers to establish a more enabling ecosystem. Workshops, masterclasses, a dedicated support portal or helpline (funded by an industry alliance) are some ways and means that the numbers can be shored up over the coming months.

Lastly, the application process itself is a colossal impediment. In today's day and age of digital, digital, digital, the IRDAI needs to take a few giant steps forward when it comes to tech adoption and process evolution. The entire process of applying for an IMF licence is rather opaque and cumbersome, still involving multiple impediments such as the need to shuttle paperwork and physical documents back and forth, multiple layers of approvals, and so on and so forth. The IRDAI might want to take a cue from the other regulator SEBI, who recently moved the application process for their "Investment Adviser" & "Research Analyst" registrations completely online. Although the documentation is slightly long and unwieldy on the SEBI portal as well, it certainly beats filling out physical documents by the dozen. Personally, I was impressed with the RIA application process. SEBI has also set up a dedicated portal help email address as well (portalhelp@sebi.gov.in), which I found to be manned by highly responsive and competent individuals, with a <12-hour TAT. This is precisely along the lines of what the IMF structure needs at this point in time.

To sum up: 63 IMF registrations in a year and a half is abysmal, representing a collective failure to launch what is, in principle, a big step forward in the right direction for the Insurance industry. More energy and resources need to be channelized into educating and empowering the community to seamlessly migrate to the IMF structure. Investments must be made in the technology that will ease the application process, SEBI style. Life Insurance Council, are you listening?