An expert committee on health insurance formed by IRDAI has recommended uniformity in the commission structure of health insurance schemes across all three segments – life insurance, non-life insurance and standalone health insurance. The move aims to ensure level playing field among insurers.
Typically, life and general insurers pay higher commission on health insurance policies compared to standalone health insurers. A Mumbai based distributor told Cafemutual that a few life and general insurance companies pay over 15% as first year commission where as standalone health insurers pay only 5% as a first year commission to agents.
Earlier in December, the insurance regulator had constituted an 11-member committee to examine the framework of health insurance. M Ramaprasad, Member, Non-Life, IRDA heads this committee as the chairman. The committee was to deal with key issues like health insurance products and distribution structure, reinsurance in health insurance, protection of policyholders and investments.
The committee has recommended a maximum commission payout of 15% in the first year, 10% in the second year, 4% between 3 and 5 years and 2% thereafter. Currently, agents get first year commission on every renewal as health insurance scheme is a one-year contract. However, the committee seems to be in favour of reducing such payouts (on renewal of policies) in the subsequent years.
Meanwhile, the committee has recommended that the first year commission payout should be amortized and such payouts should be spread over five years. The committee feels that amortization can help increase customer retention and reduce churning. The committee also recommended that IRDAI should replicate such structure across other insurance schemes like life and non-life insurance policies.