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In order to bring uniformity, IRDAI has done away with the cap on the long-term motor insurance commission.
IRDAI has repealed its guidelines on the commission of long-term motor insurance policies to agents and implemented the current commission norms applicable for all other policies.
With this, these policies will be in line with the regular motor insurance policies having validity of one year.
Insurers can offer commission structure within the expense of management. For instance, if a general insurer charges 30% of the first-year premium as expense of management, they can offer the entire 30% as commission to their agents or intermediaries.
Long term motor insurance policies have at least 5-year cover for two wheelers and 3-year cover for four wheelers. Currently, there are six types of such policies
- 5-year third party insurance for two wheelers
- 3-year third party insurance for four wheelers
- 5-year comprehensive policy that comprises own damage cover for two wheelers
- 3-year comprehensive policy for four wheelers with own damage cover
- Bundled policy with 1-year comprehensive and 5-year third party cover for two wheelers
- Bundled policy with 1-year comprehensive and 3-year third party cover for four wheelers
So far, insurers were allowed to pay up to 17.5% of the premium as the first-year commission of five-year two wheelers comprehensive motor insurance policies to agents, brokers and motor insurance service providers (largely automobile dealers). Similarly, general insurers were allowed to pay up to 10% commission on the second year and third year premium and 5% commission on fourth and fifth year premium of the policy.
In case of three-year motor insurance comprehensive policy of four wheelers, such a capping was 15% for the first year and 10% and 5% on second year and third year premiums, respectively.
Motor insurance commission structure is applicable only on premium charged towards ‘own damage’. Premium of comprehensive motor insurance policies has two components – third party and own damage.
