Substantial growth in non-life, health commission in FY 2024

IRDAI data reveals a substantial hike in commission structure of distributors in FY 2024. 

The data shows that the average commission structure of non-life and health distributors has increased from 8% of the total premium received in FY 2023 to 13% of the total premium received in FY 2024. 

This shows a hike of 62.50% in commission expenses of non-life and standalone health insurance premium. 

In absolute terms, the data shows that the general insurers including standalone health insurance companies have paid Rs.39,600 crore as commission in FY 2024 compared to Rs.20,145 crore in FY 2023, a 96% growth in absolute terms.

This substantial revision is due to removal of upper ceiling from the commission structure. 

With effect from April 1, 2023, IRDAI has done away with the cap on payment of commission. However, the insurance regulator has asked insurers to pay commission within the expense of management. 

Subsequently, general insurers can charge up to 30% of the annual premium and standalone health insurers can charge up to 35% of the annual premium with additional expenses subject to fulfilment of certain conditions.

Let us look at the table to know more:

Source: IRDAI

The analysis shows that while PSU general insurers have marginally revised their commission expenses post the removal cap on commission payment, their private counterparts and standalone health insurance companies have increased their commission expenses substantially. 

Private players have increased commission expenses from 8% of the total premium received in FY 2023 to 17% of the total premium received in FY 2024. This indicates that private non-life players have paid more than double of what they used to pay in FY 2023.

Similarly, standalone health insurers have increased their commission expenses from 13% of the premium received in 2023 to 18% of the premium received in 2024.

There is no revision in commission expenses of specified general insurance like agriculture insurance corporate and export credit guarantee corporation. 

Further analysis of data shows that the insurance companies have paid the highest commission in motor insurance. The industry has 21% of the total premium received in motor insurance compared to 12% in other segments like health, fire and marine. 

Here’s the table on segment wise commission paid ratio:

Source: IRDAI