IRDAI has issued a circular in which it has clarified that insurance companies need not calculate incentive given to intermediaries like agents and brokers on each insurance policy sold by them. Instead, insurers can calculate such incentives on a few select policies depending on certain criteria.
The insurance regulator has allowed life insurers to pay up to 20% of the first year commission as reward to insurance intermediaries. Similarly, such incentives would go up to 30% of the first year commission for insurance agents in general insurance. This has come into effect from April 1, 2017.
IRDAI has said, “The reward not being more than 20% of the first year commission or remuneration paid to insurance agents and insurance intermediaries is not linked to each and every life insurance policy solicited or total first year commission earned by an insurance agent or an insurance intermediary. Likewise, the reward not being more than 30% to be calculated separately for health insurance for agents. Also, the reward is not linked to each and every policy solicited or total commission earned by an insurance agent or an insurance intermediary.”
IRDAI further clarified that only those agents whose revenue is equal to or more than 50% from insurance intermediation are eligible to get such incentives. Simply put, banks and large distributors will not benefit from this move.
Currently, insurance agents are getting higher commissions and rewards as compared to brokers. However, IRDAI has streamlined the commission structure of agents and brokers in order to bring parity.
Earlier, IRDAI has allowed insurance companies to reward insurance intermediaries such as individual agents, corporate agents, brokers, web aggregators and insurance marketing firms with incentives. Insurance companies can pay rewards in the form of benefits such as insurance cover, gratuity, office expenses, promotional gifts etc.