Summary: This continuation of Part I delves into the evolving insurance distribution landscape in India, focusing on other channels such as web aggregators, insurance marketing firms, and common service centres, alongside traditional intermediaries like PoSPs, MISPs, and agents. It highlights regulatory prohibitions that safeguard ethical practices, policyholder-centric reforms under the IRDAI framework, and the impact of the Digital Personal Data Protection Act on intermediaries. The article underscores how compliance, transparency, and data security are shaping a future-ready distribution ecosystem that balances innovation with consumer trust.
Insurance Web Aggregators
IRDAI (Insurance Web Aggregators) Regulations, 2017 (“Web Aggregator Regulations”), define an insurance web aggregator as an intermediary operating a designated website to help customers compare insurance products. A web aggregator may be any entity, including a company, a limited liability partnership without a non-resident partner, or anyone recognised by the IRDAI to act as a corporate agent. Its primary objective is to enable transparency and informed decision-making by displaying unbiased information on policies offered by multiple insurers. To operate as a web aggregator, an entity must obtain IRDAI approval and meet eligibility requirements, and not engage in any business other than web aggregation. It cannot simultaneously function as any other intermediary or entering referral arrangements with insurers. It must have a minimum paid-up capital of INR 25,00,000, with the net worth maintained at or above 100 per cent of this level.
Insurance web aggregators are entitled to remuneration for leads converted into insurance policy sales, in line with standards for intermediaries. They may also receive a flat annual fee up to INR 50,000 per product, subject to ceilings under the EOM Regulations. Insurers may pay reasonable service charges for outsourcing functions relating to policies procured through the aggregator, as per mutually agreed service agreements. Further, they cannot be denied remuneration for direct online sales except for zero-commission products.
Insurance Marketing Firm
IMFs are entities registered under the IRDAI (Registration of Insurance Marketing Firm) Regulations, 2015 (“IMF Regulations”), to solicit and service insurance products and distribute other financial products through licensed Insurance Sales Persons (“ISP”).[1] They provide policyholders access to products from multiple insurers, ensuring broader choice and competitive options. They also undertake servicing activities such as policy administration, claims assistance, and back-office support. IMFs primarily represent insurers and focus on product marketing unlike brokers who are client focused. Moreover, they generate revenue from multiple streams, including insurance, mutual funds, and pension products, thereby offering a broader scope of financial services, unlike corporate agents, who earn commissions mainly from insurance sales.
IMFs may be established as companies, limited liability partnerships, co-operative societies, or other IRDAI-recognised entities. They can solicit and procure products from a maximum of two life insurers, two general insurers, and two health insurers at any given time. Their scope covers all individual and retail products, including crop insurance for non-loanee farmers and combi products, while solicitation of commercial lines is restricted to MSMEs. They are required to maintain a net worth of at least INR 5,00,000 when operating in a single aspirational district, i.e., any economically backward district designated by NITI Aayog, IRDAI or the Government of India, and INR 10,00,000 in all other cases.
In accordance with the EOM Regulations, insurers must pay directly to the IMF all remuneration for policies solicited and procured by an IMF. Further, life insurers may reimburse expenses incurred by IMFs for recruitment, training, and mentoring of ISPs, subject to a cap of 50 per cent of first-year commission and 10 per cent of renewal commission. IMFs may also charge reasonable fees for insurance service activities based on mutually agreed terms with insurers, supported by a formal agreement.
Common Service Centres
CSCs, launched under the Digital India Programme, act as the last-mile insurance distribution point network through CSC e-Governance Services India Limited, the special purpose vehicle set up by the Government of India for implementing the CSC scheme (“SPV”).[2] They expand access in rural and underserved areas by enabling policy issuance, renewals, premium collection, and claim support locally, through trained Rural Authorized Persons (“RAPs”) and Village Level Entrepreneurs-Ins (“VLE-Ins”).[3] The SPV have separate agreements with the insurers, RAPs, and VLEs for distribution. The RAPs can distribute life insurance products permitted for PoSPs, micro-insurance, government schemes underwritten by insurers, and any other IRDAI-approved products. They can also distribute general insurance (including health) products under the same categories, with limits twice that of PoSPs. Similarly, VLE-Ins, after training and examination, can distribute life insurance and general insurance (including health) products under the same categories.
The CPSC-SPV receives remuneration from insurers for soliciting and procuring insurance policies and delivering post-sale services, along with mutually agreed charges for other services within the limits of the EOM Regulations. It must then distribute at least 90 per cent of this remuneration to RAPs and at least 85 per cent to VLE-Ins, ensuring monthly settlements with no cross settlements.
Other Distribution Channels
Various channels complement traditional intermediaries by expanding reach and simplifying access to insurance products. Such channels include POSP, insurance agents, and MISP:
- PoSPs are individuals with minimal qualifications who can market and distribute only certain pre-underwritten products or those requiring minimal underwriting (such as personal accident policies, travel insurance, and home insurance), as approved by the IRDAI.[4] As per Guidelines on Point of Sales Person – Non-Life & Health Insurers (“PoSP Guidelines”) and IRDAI Master Circular on Point of Sales Products and Persons – Life Insurance (“PoSP Master Circular”), they can be associated with only one insurer or intermediary at any given time.[5] Further, in the context of life insurance, PoSPs can distribute plain vanilla products such as pure-term plans and immediate annuities, where benefits are clearly defined and transparently disclosed upfront at the time of sale.[6] For non-life and health insurance, PoSPs can sell only pre-underwritten products with the sum insured capped at INR 5,00,000 per policy, and the PoSP Master Circular prescribes limits for life insurance (e.g., INR 10,00,000 for endowment).
- In the motor insurance segment, MISPs are like automobile dealers appointed by insurers or intermediaries to distribute and service motor insurance policies for vehicles sold through them.[7] They offer customers with policy options from different insurers, disclose premium rates transparently, and issue policies only with explicit consent from the prospect.[8]
- PoSPs and MISPs receive commission only when directly engaged by insurers, within relevant regulatory limits. However, when these distributors operate through insurance intermediaries, they receive remuneration as per agreed terms.
- An insurance agent is appointed by the insurer and receives commission or remuneration for soliciting or procuring insurance business, including renewals and revivals of policies. Insurance agents assist customers with proposal forms and smooth onboarding. In the existing framework, one agent can represent only one life insurer, one general insurer, one health insurer, and one of each mono-line insurer. Insurers are responsible for all acts and omissions of their agents, including compliance with the code of conduct specified under Section 42(3)(h) of the Insurance Act. Under the IRDAI (Appointment of Insurance Agents) Regulations, 2016, the insurer’s board-approved policy sets the insurance agent’s minimum educational qualification, though passing the 10th standard is recommended. Applicants must be at least 18 years old, complete compulsory pre-licensing training at an IRDAI-recognised institute, and pass the insurance agency examination to qualify.
What Is Strictly Prohibited?
Various activities are prohibited from being undertaken by insurance distributors under the IRDAI regulatory framework:
- If an insurance intermediary acts without registration, it can attract penalties between INR 1,00,000 and INR 10,00,000, while appointing or transacting through unregistered persons can attract penalties not less than INR 10,00,000 and up to INR 1,00,00,000.[9]
- No person acting as an insurance intermediary or otherwise can offer or accept premium or commission rebates except in accordance with the insurer’s published prospectus.[10]
- Web aggregators are prohibited from offering any rebates or discounts or any other inducement to the prospective policyholders[11] and from promoting specific products of a particular insurer,[12] ensuring ethical distribution practices.
- Insurers are prohibited from transacting via principal agents, chief agents, special agents, or any other scheme aimed at soliciting insurance business through persons not authorised.[13]
- Corporate agents are prohibited from misrepresenting or omitting information from the proposal form, engaging in unethical sales practices, using unauthorised persons or misleading calls, offering terms different from those offered by the insurer, or indulging in money laundering, or entering into agreements with any other person than the specified person.
- Insurers cannot pay incentives directly to the principal officer, specified persons, and other employees of corporate agents.
- MISPs are prohibited from forcing prospects to buy motor insurance from a specific insurer or intermediary[14] and solicit motor insurance business from those persons who did not buy the automobile from it.[15]
- An IMF is prohibited from undertaking multi-level marketing.[16]
- TPAs are prohibited to charge any fees in any form or in any manner from the policyholders or network providers for the health services rendered under the TPA Regulations and in terms of the agreement. A TPA shall not directly make payment in respect of claims, reject or repudiate any claims, or handle claims other than hospitalisation cover under a personal accident policy.
- Insurers are prohibited from paying any remuneration linked to product performance, claims experience, or reduction of claim costs to TPAs.
- SLAs must not disclose client, employer, or policyholder information acquired during professional work to any third party without consent or legal duty to disclose. They cannot use confidential information for personal or third-party advantage nor provide advisory or consultancy service or work that creates conflicts of interest.
Policyholder-centric reforms enabling distribution
The IRDAI (Protection of Policyholders’ Interests) Regulations, 2024 (“PPHI Regulations”), have significantly enhanced the protection available to policyholders. The following measures ensure fair treatment of policyholders and strengthen the insurance distribution network:
- The insurer must ensure that policyholders have equitable and inclusive access to insurance products either directly or through the distribution channels.
- The policyholder’s explicit consent is required for amount deduction from the policyholder’s bank account towards premium payment.[17]
- All distribution channels must maintain utmost confidentiality of policyholder information and documents collected during the solicitation or subsequently.
- All distribution channels must have robust and effective grievance redressal procedures in place.
Impact of the DPDP Act on Insurance Intermediaries and Distributors
The recently notified Digital Personal Data Protection Rules (“DPDP Rules”), 2025, operationalise the DPDP Act, 2023, by adding a more detailed and prescriptive data‑governance framework to the existing IRDAI regime, creating new compliance expectations for insurers, intermediaries, and distribution channels. Under the PPHI Regulations, distribution channels must keep policyholder information confidential and allow disclosure only with the policyholder’s explicit consent. The DPDP Rules define how to obtain consent and what to communicate to customers. Rules 3(b) and 3(c) require intermediaries (acting as data fiduciaries) to issue notices to policyholders to obtain their specific and informed consent to process personal data. They must do so in clear and plain language, itemising the personal data collected, the specific purposes of processing the data, and the consent withdrawal mechanisms available to customers. For children or persons with disability, these data fiduciaries must obtain verifiable consent from a parent or lawful guardian. Rule 6 also introduces mandatory technical safeguards, such as encryption, masking, access controls, monitoring, and minimum one‑year log retention, to strengthen the confidentiality obligations under IRDAI regulations. Therefore, intermediaries and distributors must upgrade their security infrastructure and internal processes to ensure compliance.
Conclusion
India’s insurance distribution framework has already strengthened transparency through reforms like consent-driven sales, compliance, and grievance redressal mandates. The next step is to build on these measures by expanding digital onboarding and enforcing uniform conduct standards across all channels. As tech-driven models grow, the focus must shift from mere compliance to proactive governance, ensuring ethical practices, data security, and consumer trust. The way forward is a distribution ecosystem that combines regulatory rigor with innovation, making insurance accessible and fair.
For further information, please contact:
Pranjita Barman, Partner, Cyril Amarchand Mangaldas
pranjita.barman@cyrilshroff.com
[1] Regulation 2.8, IMF Regulations.
[2] Regulations 2.3 and 2.4, IRDAI (Insurance Services by Common Public Service Centers) Regulations, 2019.
[3] Schedule II, Part II, IRDAI (Insurance Services by Common Public Service Centers) Regulations, 2019.
[4] Paragraph II (d), PoSP Guidelines.
[5] Paragraph VII, PoSP Guidelines and Paragraph 21.2, PoSP Master Circular.
[6] Paragraphs 5.4 and 6.1, PoSP Master Circular.
[7] Paragraph 3(f), IRDAI Guidelines on Motor Insurance Service Provider, 2017.
[8] Paragraph 10, IRDAI Guidelines on Motor Insurance Service Provider, 2017.
[9] Section 42-D (8), Insurance Act.
[10] Section 41, Insurance Act.
[11] Regulation 30E, Web Aggregators Regulations.
[12] Regulation 21C, Web Aggregators Regulations.
[13] Section 42-A, Insurance Act.
[14] Paragraph 11(b), IRDAI Guidelines on Motor Insurance Service Provider, 2017.
[15] Paragraph 11(i), IRDAI Guidelines on Motor Insurance Service Provider, 2017.
[16] Regulation 11.6, IMF Regulations.
[17] Master Circular on Protection of Interests of Policyholders dated September 5, 2024.
