IRDAI moves towards more liberalised regime

Mumbai IRDAI signifies movement towards a more liberalised regime, feel experts. The IRDAI has notified the IRDAI (Payment of Commission) Regulations, 2023. The notification is dated March 26 and governs payment of commission to Insurance intermediaries.

Simultaneously, the IRDAI has also notified the IRDAI (Expenses of Management of Insurers transacting General or Health Insurance business) Regulations, 2023.

By notifying the Payment of Commission Regulations, 2023 the IRDAI has now removed all the erstwhile caps on the payments which an insurer could make to insurance intermediaries. This is however, subject to the insurers maintaining the Expenses of Management limits set by the IRDAI. In the Expenses of Management Regulations, 2023, the IRDAI has simply stated that Insurers carrying on General Insurance Business in India shall incur expenses of management upto 30 percent of gross premium written in India in a financial year while Insurers carrying on Standalone Health Insurance Business in India shall incur expenses of management upto 35 percent of gross premium written in India in a financial year. Over and above the aforesaid limits, the IRDAI has allowed additional expenses in relation to set up of foreign branches, set up of branches in the IFSC, expenses in relation to rural sector, government insurance schemes, Insurtech and Insurance Awareness.

Talking to Bizz Buzz, Indranath Bishnu, Partner, Cyril Amarchand Mangaldas, says, “The new regime introduces a single limit basis the total GWP of the general and health insurer. It has removed the erstwhile segmental calculation of the allowable limits associated with expenses of management.”

This change introduced by the IRDAI signifies movement towards a more liberalised regime further to the stated objective of providing flexibility to the Insurers to manage their expenses within the overall limits based on their gross written premium, he said.

It is clear that as long as an insurer maintains financial hygiene, it is free to determine the extent of commission to be paid to its intermediaries. Moving to such a liberalised regime will help intermediaries and insurers to enter into more viable arrangements and increase penetration.