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IRDAI has brought parity in treatment of payment of commission of agents/brokers and Motor Insurance Service Providers (MISP).
IRDAI said that motor insurance service providers will get board approved commission structure and it has to be within expense of management (EoM). Simply put, insurers will have to get approval from their board on commission structure of MISP just like agents and intermediaries.
From April 1, 2023, IRDAI has done away with the cap on commission and directed insurance companies to devise a board approved policy to pay commission to agents and intermediaries but such a structure has to be within EoM.
The insurance regulator said, “The distribution fees payable to MISP shall be as per Board approved policy for payment of commission of the insurer. The provisions in all the extant circulars relating to distribution fees payable to MISP are hereby withdrawn. However, all other relevant provisions relating to MISP shall continue to remain in effect.”
So far, MISPs who are essentially automobile dealers commanded higher commission than agents and brokers. In fact, IRDAI allowed insurance companies to pay up to 22.5% of total premium as the commission in 2 wheelers and 19.5% of the total premium for other vehicles such as cars and SUVs, which were much higher than the commission structure of agents and brokers.
