Now, a limit has been set to what agents can earn from rewards. Many life insurance companies have set a transparent criterion on payment of rewards to their agents in which they have put agent-wise cap on reward payment.
In an effort to check discrepancies in the payment of rewards and incentives to insurance intermediaries like agents and brokers, many life insurance companies have set a well-defined process based on necessary justification and logic for payment of rewards to their insurance agents and intermediaries.
The move has come after IRDAI found instances where insurance companies have paid rewards to their agents, which are much more than the commission paid to them.
IRDAI allows life insurers to pay up to 20% of the first year commission as rewards to insurance intermediaries. Such incentives can go up to 30% of the first year commission for insurance agents in general insurance.
However, intermediaries whose revenue is more than 50% from sources other than insurance intermediation are not eligible to get such incentives. Simply put, most banks and large distributors do not receive rewards.
Currently, insurance companies reward insurance intermediaries such as individual agents, corporate agents, brokers, web aggregators and insurance marketing firms, with incentives. The rewards are paid in the form of benefits such as insurance cover, gratuity, office expenses, promotional gifts etc.
Many insurance companies have announced that they will pay rewards based on overall basis. The company will not pay rewards based on the sale of each and every policy.
Here are the key changes to the reward policies of insurers:
- Insurance companies have set transparent criteria for payment of rewards along with the necessary justification and logic
- Insurance companies have capped the maximum limit on rewards
- Insurance companies have implemented effective oversight of their rewards policy
