Listen to this article
Insurance companies will have to pay commission uniformly across insurance intermediaries.
In a master circular on the expense of management including commission of insurers, 2024, IRDAI has asked insurance companies not to discriminate between agents and intermediaries based on their size of business and bargaining power to pay commission.
IRDAI said, “The commission structure shall be reasonable and not result in excessive compensation for intermediaries at the expense of customers or the insurer. Insurers shall ensure their commission structure is commensurate with the efforts required to acquire and sustain that type of business. This means intermediaries shall be compensated fairly for their work, regardless of their size or bargaining power.”
Overall, IRDAI has asked the board of insurance companies to follow a few principles to devise commission structure of agents and intermediaries. Let us look at them:
· The board should have clear objective for devising commission structure
· The board should outline rules and regulations for intermediaries to ensure that they adhere to high standards of behaviour and ethical practices
· The insurers will have to address conflict of interest by ensuring intermediaries should not recommend policies which are not in best interest of clients to earn higher commission
· The commission structure should promote fair and transparent competition among intermediaries, align incentives with customer needs and encourage efficient and cost-effective distribution
· The commission structure should enhance customer satisfaction, build stronger relationship with customers and increase insurers market share
