The select parliamentary committee which has given its nod to the much awaited insurance bill has recommended the government to provide flexibility to IRDA to review the commission structure.
Ache din are likely to come soon for insurance intermediaries. The select parliamentary committee which has given its nod to the Insurance Bill has recommended that IRDA be given the flexibility to review, monitor and decide the commission structure of insurance intermediaries.
Simply put, IRDA can remove cap from commission paid to the insurance intermediaries for selling insurance policies which it has been propagating for years. Removal of such cap will give insurers the freedom to decide the commission structure on their own.
Recently, in a public forum, IRDA Chairman TS Vijayan said that the insurance companies should adequately compensate distributors. He said that insurance intermediaries should be in a position to earn at least Rs. 10,000 per month from selling insurance policies. He, however, said that insurers can pay higher commission from their shareholders account. Currently, insurance companies pay commissions from their premium amount.
Earlier, IRDA had proposed to the select parliamentary committee to remove the cap from commission on insurance policies.
Media reports said that the Cabinet has already approved the incorporation of amendments suggested by a parliamentary select panel in the Insurance Laws (Amendment) Bill, 2008.
“The committee recommends that flexibility may be given to IRDA to prescribe the broad architecture for determination of the expenses of an insurer in any financial year as regards the remuneration to their agents/intermediaries, as it may require continuous monitoring and modification due to the ever changing dynamics of the insurance market. The committee also recommends that adequate protective mechanism may also be instituted by IRDA to ensure that the due commission to the agents against business done is protected through regulations and their commission structure should be determined by IRDA depending on market condition,” said the committee.
On proposal of imposing a fine of up to Rs.1crore on insurance companies for mis-selling and violation of code of conduct by their agents, the committee has recommended to the government to allow IRDA to rationalize the quantum of penalty on insurance companies for such offenses.
The insurance bill which has been pending since 2008, is expected to sail through in the parliament in the current winter session. The bill is expected to be tabled before Rajya Sabha this week.