Nilesh Satha, Member Life, IRDAI said that insurance intermediaries should be adequately compensated and this compensation has to come from investors pocket only. He was speaking at the fourth CII Financial Distribution Summit held today in Mumbai.
He was referring to the recent recommendations of Bose committee in which it has recommended to pay upfront commissions on mortality charges only (the part of premium paid towards availing life cover) and stipulated that commission payouts should be within the expense ratio.
Sathe said, “If the insurance industry eliminates intermediaries altogether, then what will be the impact on growth? That is something to look into. Also, if intermediaries are required, then they should be compensated adequately. There are 21 lakh agents selling insurance. There has not been much growth in number of agents and intermediaries are required because they push products. If agents have to be compensated, it has to come from the pocket of investors only and not from anywhere else.”
Apart from recommending capping of upfront commission, the committee has suggested the rationalization of trail commission in traditional policies and ULIPs. The committee has suggested that insurance companies should pay a fixed percentage of premium till the tenure of non-participating policies as renewal commission or trial commission. Participating policies which distribute realized gains among policyholders should pay trail commission based on assets under management. Also, the committee has strictly recommended putting an end to the practice of paying advance commissions to distributors and passing back of commission to policyholders.
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