Insurance IRDAI hikes commission in non-life insurance policies

IRDAI hikes commission in non-life insurance policies

Insurance intermediaries like insurance brokers, insurance marketing firms and web aggregators to get higher commissions compared to insurance agents in select non-life policies.
Nishant Patnaik Jan 6, 2017

IRDAI has a new year gift for insurance agents and intermediaries. The insurance regulator has hiked the commission structure of insurance agents and insurance intermediaries like insurance brokers, insurance marketing firms and web aggregators in non-life insurance policies.

IRDAI has increased the commission structure in comprehensive or own damage motor insurance policies to 15% of the premium. However, this commission structure is applicable only on premium charged towards own damage. Premium of comprehensive motor insurance policies has two components – third party and own damage.

So far, general insurers were paying up to 10% as commission on such policies.

Surprisingly, the insurance regulator has introduced commissions in third party motor insurance too. IRDAI has kept commissions under such policies at 2.5% of annual premium. So far, there were no commissions on third party motor insurance. However, many insurance companies were reportedly paying a flat fee of Rs. 150 to help distributors recover client acquisition costs.

Though third-party motor insurance policy is mandatory in India, only a few vehicles are insured. Most non-life insurance companies, particularly, private insurers are reluctant to issue third party motor insurance. They tend to push comprehensive own damage cover to policyholders. Motor third party insurance cover is a loss making business for non-life insurers due to unsustainable premium tariff. With the latest development, agents and brokers are likely to push comprehensive policies. Also, the insurance premium of both own damage and third party motor insurance is likely to increase.

Unlike life and health insurance policies where IRDAI has brought parity in the commission pay outs of various distribution channels, the insurance intermediaries will get higher commissions compared to insurance agents in select non-life products.

For instance, the insurance regulator has changed the commission structure in some general insurance products like fire and marine insurance for both agents and intermediaries. While IRDAI has increased commission structure in fire insurance retail segment from up to 12.5% of annual premium to 15% of annual premium for agents, such payouts can go up to 16.5% of annual premium for intermediaries.

Similarly, the commission payouts in marine insurance policies and miscellaneous policies remain unchanged for agents which was 15% of annual premium. However, it has been increased for intermediaries to 16.5% of annual premium.

The commission structure of miscellaneous policies (retail and group) remains unchanged. The commission payouts from all these policies will continue to be up to 15% of annual premium.


umang agarwal · 1 year ago
Firstly IRDA increase commission on Term Insurance up to 40 % now non life commissions also increased but in our mutual fund business, they are making more complex n anti distributors.
s pattnaik · 1 year ago
IRDA encourges agents by increasing commission which is already higher While SEBI and its officials the fools decreasing commission day by day which is already very low among all financials products and comparing salaries of AMC staff and SEBI officials,SEBI paid distributors like road side beggars.SEBI by its own hand destroying the MF industry.
Ajay Sharma · 1 year ago
IRDAI has understand the mindset of the society and knows that these products have to be pushed & not bought by insurer. SEBI is happy with 1 crore SIP mark & think that they have created enough awareness among masses who will now que up to invest their money on their own only to realize during volatile period they did a blunder.
Alok · 1 year ago
Sebi is not worried about distributor professional,IAF is playing key role in MF bussiness,but sebi always work against Distributor
PRITPAL SINGH · 10 months ago
IRDA has revised the commission structure for agents in Non-life insurance companies but the companies whilst implementing the instructions have reduced the commission in Fire, and Misc. departments. For Fire and Misc.(Retail), NIA have taken only the parties in INDIVIDUAL NAME under Retail category and other clients even with 10 lacs of sum insured have been taken under CORPORATES, which appears to be wrong interpretation. The purpose of IRDA increasing the commission for agents has been defeated and rather it has resulted in REDUCTION IN COMMISSION. IRDA SHOULD CLARIFY IMMEDIATELY.
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