IRDAI has issued a draft guidelines in which it has proposed to scrap additional commission paid to insurance agents on achieving certain targets in non-life and health insurance policies. Also, the insurance regulator has proposed to put an end to the practice of paying advance commission to a few agents (corporate agents).
In the draft guidelines, IRDAI said, “No upfront payments whether direct or indirect is allowed in respect of current and future business volumes to insurance intermediaries. No payment to insurance intermediaries can be made in advance before the risk start date of any policy whether retail or corporate. No insurer shall directly pay incentives (cash or non-cash) to the principal officer, specified persons and other employees of the Insurance Intermediaries.”
Typically, non-life and health insurance companies pay additional commission to their agents on achieving certain targets in the form of cash rewards and junket. Also, a few companies have allegedly found to have paid commission in advance to large corporate agents like banks and NDs to mobilize their business.
KG Krishnamoorthy Rao, Managing Director & Chief Executive Officer, Future Generali General Insurance said, “Previously, the clarity on commission structure was lacking. This draft will limit the expenses incurred on agents.”
IRDAI had sought feedback from insurance companies through Life Insurance Council (LIC) and General Insurance Council (GIC) to rationalize commission structure of insurance agents. A senior official from IRDAI had earlier told Cafemutual that the insurance regulator has sought to limit the expenses incurred on agents in the form of junket, loyalty program etc. within the upfront commission.
IRDAI has invited feedback on the draft guidelines by October 11.