In a draft circular, IRDAI has proposed to reduce the difference between the commission payouts in health insurance policies issued by life insurance companies, general insurance companies and standalone health insurance companies.
IRDAI has said, “The underlying approach in framing the regulations is based on parity in commission remuneration to health segment being solicited under the life insurance category and general stand-along category.”
Health insurance policies offered by life insurance companies pay certain amount for a particular disease on claim settlement. They follow a table prescribed by IRDAI to settle claims. Hence, the claim amount can be higher or lower than the cost incurred for the treatment of a particular disease. On the other hand, health insurance policies of general insurers and standalone health insurers pay reinstatement value on hospitalization.
Typically, life insurers pay higher commission in health insurance policies compared to general insurers and standalone health insurers. A Mumbai based distributor told Cafemutual that life insurance companies pay close to 35% of annual premium as commission whereas general insurers and standalone health insurers pay only 15% of annual premium to agents.
In order to create a level playing field, IRDAI has capped the commission payouts at 10% for life insurers and kept such payouts unchanged for general insurers and standalone health insurers i.e. at 15% of annual premium. Currently, agents get first year commission on every renewal as most health insurance schemes are one-year contracts.
On single premium health insurance policies having duration of 2-3 years, the commission payout will be 12.5% and 10% of premium respectively. Mumbai based financial advisor Deepak Khemani says, “A few companies offer policies having duration of over a year as policyholders don’t pay lump sum amount for coverage of three years.”
Similarly, policies having duration of two years with multiple premium paying term will offer 12.5% and 10% of annual premium in the first and second year respectively.
On group health insurance policy, life insurers can pay up to 2% of annual premium not exceeding Rs.2 lakh per policy. Similarly, non-life insurers and standalone health insurers can pay up to 1% of annual premium as commission to intermediaries.
Social security health insurance scheme will continue to pay 0.50% of annual premium not exceeding Rs.50,000 per policy to agents.
Last year, an expert committee on health insurance formed by IRDAI had recommended bringing uniformity in the commission structure of health insurance schemes across all three segments – life insurance, non-life insurance and standalone health insurance.