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IRDAI has introduced a new expense of management (EoM) guidelines in which it has not changed the existing commission structure of agents and intermediaries.
Insurers can continue to offer commission structure within the expense of management. For instance, if a life insurer charges 100% of the first-year premium as expense of management, they can offer the entire 100% as commission to their agents or intermediaries.
However, insurers will have to follow a board approved commission structure. Such a policy has to keep six things in mind:
- Protect interest of policyholders
- Increase insurance penetration and density
- Commensurate with the tenure of insurance policy
- Protect interest of agent and enhance their performance
- Commensurate with its business strategy
- Simple to administer and cost effective
Here is the maximum commission structure that insurers can offer to their agents/intermediaries across policy categories:
|
Policy type |
Expense of management limit |
|
Term plan |
100% |
|
Term plan |
25% |
|
Term plan |
14% |
|
Traditional plan like whole life, money back and endowment |
80% |
|
Traditional plan |
17.50% |
|
Deferred annuity |
15% |
|
Deferred annuity |
6% |
|
General insurance |
30% |
|
Health insurance |
35% |
For other single premium policies and immediate annuity products, life insurers can charge up to 5% of the total premium with additional expenses based on a few criteria like allowance for head office expenses and insurtech and insurance awareness.
However, for group pure term, the expenses can go up to 10% on single premium policies and 15% on renewable policies.
Other key developments:
- If insurers exceed EoM within the allowable limits (i.e. up to 10%), it has to be charged to profit and loss account
- If it exceeds over 10% of the EoM limits, insurers cannot pay variable to key managerial person like MD, CEOs and so on
- Insurers will have to get approval from their board on commission structure of intermediaries within 45 days of each financial year.
- Insurers can charge an additional 5% for expenses towards insuretech
- Life insurers can charge an additional 5% expenses for setting up head office in International Financial Services Centre (IFSC). Such a leeway is proposed to be 10% for general and health insurers
- Insurers can spend 5% towards increasing awareness about insurance. This money can be channelled in insurance councils
- 15% of the total premium can be charged to run social security schemes like Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jan Arogya Yojana (PMJAY), Pradhan Mantri Fasal Bima Yojana (PMFBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
These guidelines will remain in existence till March 31, 2026.
