Almost a year back, the insurance regulator was allowed to redraw distributor incentives. Till the Insurance Laws (Amendment) Act, 2015 shifted power to the regulator, commission caps were described in the Insurance Act of 1938. On 13 January, the Insurance Regulatory and Development Authority of India (Irdai) finally came out with a draft exposure on commissions and remunerations of insurance distributors, which, in the case of life insurance, is nothing short of disappointing.
To begin with, it doesn’t sit well with the big picture of reducing incentive arbitrage in financial products and moving to trail model of commissions (commissions spread over the lifetime of the product, instead of bunched up in the beginning).
