More latitude likely to insurers on commissions

Currently, the commission on general insurance products is defined LoB (Line of Business) wise and varies from product to product. IRDAI has issued an exposure draft on overall commission payable to be capped at 20% and sought feedback from all insurers on the same. This will provide more flexibility to insurers and provide a fillip to the overall industry, said Suresh Agarwal, MD and CEO, Kotak Mahindra General Insurance Company

Mumbai: After setting stiff premium targets for the insurers, IRDAI in its 'Exposure draft- Insurance Regulatory and Development Authority of India (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2022' has given larger freedom to the insurers to pay larger commissions to the intermediaries to achieve these targets, said industry observers.

Allowing a larger payment to intermediaries by the insurers, the IRDAI has now proposed the maximum commission or remuneration or reward or otherwise payable under general insurance products including health insurance products offered by general insurers should not exceed 20 per cent of the gross premium written in India in that financial year.The intermediaries in the insurance industry are- Corporate Agents, Insurance Brokers, Web Aggregators, Insurance Marketing Firms, Common Public Service Centre – SPV.

After setting stiff premium targets for the insurers, the IRDAI unveiled on Tuesday has given larger freedom to the insurers to pay larger commissions to the intermediaries to achieve these targets, said industry observers adding that it may more benefit the private sector insurers than their PSU counterparts.

Talking to Bizz Buzz, Suresh Agarwal, MD and CEO, Kotak Mahindra General Insurance Company, said: "Currently, the commission on general insurance products is defined LoB (Line of Business) wise and varies from product to product. IRDAI has issued an exposure draft on overall commission payable to be capped at 20 per cent and sought feedback from all insurers on the same. This will provide more flexibility to insurers and provide a fillip to the overall industry."

The maximum commission or remuneration or reward or otherwise payable under life insurance products including health insurance products offered by life insurers will be like this: If the actual Expenses of Management (EOM), in the preceding financial year is not exceeding 70 per cent of the allowable EOM limits, the life insurer, with the approval of the Board, shall opt, for the financial year: either to adopt commission limits as per Schedule – I or to adopt commission limits in accordance with the Board approved policy. Where actual EOM, in the preceding financial year exceeds 70 per cent of the allowable EOM limits, the life insurer has to comply with the limits as per Schedule – I for the financial year.

Every insurer will have an explicitly written policy for payment of commission or remuneration or reward to insurance agents and insurance intermediary which has to be be approved by the board of the company, said the IRDAI.

All insurers, within 45 days of the expiration of each financial year has to prepare returns on payment of commission remuneration and reward to be submitted to the IRDAI, added the IRDAI. The Board approval policy have to be reviewed annually based on the experience and the objectives of the policy for payment of commission or remuneration or reward will include enhancement of performance of insurance agents and insurance intermediaries to increases insurance penetration and density in the country. The new regulations on the commissions will also provide the insurers the flexibility to manage their expenses based on their growth aspirations and the ever-changing insurance needs with an objective to improve insurance penetration, said the IRDAI. All the stakeholders have been requested by IRDAI to submit their comments if any, on the proposed draft regulations by September 14.