According to a notification from insurance regulatory and development authority (IRDA), common services centre (CSC) in rural areas can now sell insurance products and services in both the categories, life and non life.

On Wednesday, the IRDA in its guidelines said that the village level entrepreneurs manning the CSCs will now be able to become the rural authorized persons (RAP) and play the role of an insurance agent.

“The insurance companies shall develop insurance products to be marketed exclusively through the CSC model,” guidelines said. The products, however, should not have the sum assured exceeding Rs 2 lakh except for motor insurance, the guidelines said.

The products and services will be marketed through CSC e-governance services India Ltd- a special purpose vehicle constituted by department of electronics and information technology (DEITY), government of India for overseeing the CSC network. CSCs have been set up under the national e-governance plan in a public private partnership mode to deliver government, business and social sector services to the rural residents.

The CSCs, which are manned by village level entrepreneur (VLE), are run by the government through intermediaries – the private partner called as service centre agency, (SCA). It is the SCA’s responsibility to appoint VLEs and manage the network in their respective areas. The CSC SPV will sign contracts with the insurers in next two to three months. The SPV has already got Tata AIA on board, which will also pay a regular monthly income of Rs 2000 to the VLEs (RAPs in IRDA terms).

To get the licence, the CSC operators will have to pay an application processing fee of Rs 5,000 to IRDA for three years. For its renewal, they will have to pay Rs 1000. According to the guidelines, the RAPs should have completed 20 hours of theoretical (online) training and pass an exam conducted by national institute of electronics and information technology (NIELIT).

As guidelines state, the CSC SPV will distribute 80 percent of the remuneration from insurers to the RAP, 12 percent to the SCA, agency which appoints the CSC operators and manage the CSC network in states and rest of 8 percent will go to the SPV.

According to a senior official with CSC e-governance services India Ltd, all VLEs who qualify as RAP will be provided with a monthly income of Rs 2000, as in the case of Tata AIA. This income is apart from what they receive as remuneration from selling and managing policies. The move is expected to boost the viability of the CSCs which have been struggling for viability since their inception. Some of the SCAs, however, are not happy with the move, as it is “eating into their margins”.

According to an official associated with CSC Forum, which is an association of 8 out of the total 17-18 SCAs, the CSCs were already offering insurance products. The contract, in this case, was signed between the SCA and the insurance service provider. The remuneration was equally shared between the two. Now since every single contract will be routed through CSC SPV and the revenue sharing will be based on 80:12:8 model , the income of the SCAs will go down.

The official also said that the CSC SPV is a private organization – the government holds just 49 percent equity – and so it can’t get preferential treatment from the IRDA and act as insurance aggregator. Another official with the Forum said that the margins have been cut in cases of other services being offered through the CSCs. The same has happened in the case of Red Bus services, the official said.

Refuting SCA’s perspective, the CSC SPV official said that the relationship between SCA and VLE has to be symbiotic. We cannot allow the SCAs to make profit while at the same time the VLEs starve. “Ensuring a certain income of VLEs, which is critical for sustaining the whole CSC programme, is our priority. And as time goes, the participation of the intermediaries will get leaner and thinner,” he said.