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.