In a circular issued on commission and remuneration paid to insurance agents and intermediaries, IRDAI has made the commission payouts in health insurance policies uniform across life insurance companies, general insurance companies and standalone health insurance companies.
Since IRDAI has discontinued pure indemnity based health insurance policies which are offered by life insurance companies from August 2016, life insurers are coming out with fresh policies in line with non-life insurers and standalone health insurers. That means, commission structure of health insurance policies offered by life insurers will be in line with non-life insurers and standalone health insurers.
Earlier, health insurance policies offered by life insurance companies used to pay certain amount for a particular disease on claim settlement. They use to follow a table prescribed by IRDAI to settle claims. Hence, the claim amount could 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.
Till August 2016, life insurers were paying higher commissions 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 15% of annual premium in individual health insurance policies irrespective of companies. 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 is capped at 15% of premium per annum. Currently, only a handful of companies offer policies having duration of over a year as policyholders dont prefer to pay lump sum amount for coverage of three years.
On group health insurance policy, life, non-life and stand alone health insurers can pay up to 7.5% of annual premium. In the draft circular, the insurance regulator had proposed to keep the commission at 1% of annual premium.
Social security health insurance scheme will continue to pay as specified by the government which is currently 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.