TS Vijayan, IRDAI Chairman said that commissions and expenses of insurance intermediaries should be linked to quality of services they provide – both pre-sale and post-sale services. He was quoted in the monthly magazine published by the insurance regulator called IRDAI Journal.
Vijayan said that agents should justify what they are getting by constantly improving their services. He also signaled that the insurance regulator wants to bring parity in commission payouts across the industry. He said, “While the regulator would strive to maintain parity amongst various insurers on such payments keeping the policyholders’ interest in mind, it is essential that, in a highly competitive market, rewards or commissions need to be earned rather than demanded for. With technological advancements like online sale and service of insurance products becoming a reality, the service quality of the intermediary (both pre-sale and post-sale) would only be the deciding factor on the amount of remuneration or commission to be paid. This point needs to be kept in mind and utmost care and efforts must be devoted to further improve the service quality leaving little scope for compliant from policyholder against any intermediaries.”
Vijayan said that there is a discussion underway regarding the commissions and expenses payable to intermediaries and whether they can be curtailed in order to reduce the overall expense ratio of insurers.
However, Vijayan had earlier told Cafemutual that distributors should be adequately compensated. He had said “Distributors play a key role in the growth of the insurance industry. They are the means of communication between insurance companies and consumers. Distributors are the face of insurance companies and hence they deserve adequate remuneration for their services; in fact, more than the CEO of an insurance company.”
In January, IRDAI had come out with draft guidelines on new commission structure of insurance intermediaries in which it had proposed to hike the first year commission to 50% of annual premium under term insurance policies having tenure of over 12 years. The insurance regulator has proposed to hike the commission structure of agents and other intermediaries across all categories like brokers, corporate agents, insurance marketing firms etc. In addition, the regulator has proposed to reward such intermediaries with benefits like insurance cover, gratuity, office expenses, promotional gifts etc. Many insurance companies have reportedly opposed this proposal.
