IRDA has constituted a committee headed by Amitabh Chaudhry, CEO, HDFC Standard Life to review the commission structure of life insurance intermediaries like agents, brokers and insurance marketing firms.
Recently, IRDAI has hiked the upfront commission and trail commission in selected segments and made the commission structure uniform across all intermediaries such as agents, brokers, corporate agents, insurance marketing firms and web aggregators. In fact, it has hiked the first year commission (upfront commission) in term insurance plans irrespective of term of the policy to 40% of annual premium. So far, the first year commission payouts under such policies have ranged between 20% and 35% of annual premium.
In a circular issued today, IRDAI has said that the committee will review product regulations in life insurance considering changing economic and market environment.
Apart from reviewing commission structure of intermediaries, here are the other key areas in which committee is expected to submit its review report
- Changes in needs and expectations of customers
- Flexibility and innovations in product design
- Probability of mis-selling and protection of policyholders
- Suggesting innovative way to distribute insurance products
- Reviewing the recommendations of the Sumit Bose committee report
Earlier in 2015, Sumit Bose had recommended continuation of upfront commission in traditional policies and ULIPs. However, such commissions would be paid on mortality charges or the part of premium paid towards availing life cover. The committee had recommended that insurance companies should pay a fixed percentage of premium till the tenure of non-participating policies as renewal commission or trail commission. Participating policies which distribute realized gains among policyholders, should pay trail commission based on assets under management.
Among other key recommendations of this committee were putting an end to the practice of paying advance commissions to distributors, passing back of commission to policyholders and using riskometer to depict risk level in ULIPs.
The eight-member IRDAI committee comprises KS Gopalakrishnan, CEO Aegon Religare Life, Sai Srinivas, Appointed Actuary, Bajaj Allianz Life, Sandeep Bakshi, ICICI Prudential Life Insurance, Dinesh Pant, Actuary, LIC India, Sanjeev Punjari, Executive Diector, SBI Life Insurance, V Manickam, Secretary, Life Insurance Council and Pankaj Kumar Tewari, DGM Actuarial, IRDAI.
The committee is expected to submit its report by March 15, 2017, said IRDAI.
