IRDAI has clarified that insurance companies will have to follow the existing norms to remunerate insurance agents, brokers and other intermediaries till the time of implementation of new commission guidelines.
IRDAI said, “As the fresh regulations are likely to take some more time, the regulator advises all the insurers, insurance intermediaries and insurance agents that they shall continue to comply with the existing regulations and circulars issued by IRDAI pertaining to commission or remuneration or brokerage paid directly or indirectly.”
In January, IRDAI had come out with draft guidelines on new commission structure of insurance intermediaries in which it had proposed to hike the first year commission to 50% of annual premium under term insurance policies having tenure of over 12 years. The insurance regulator has proposed to hike the commission structure of agents and other intermediaries across all categories like brokers, corporate agents, insurance marketing firms etc. In addition, the regulator has proposed to reward such intermediaries with benefits like insurance cover, gratuity, office expenses, promotional gifts etc.
Many insurance companies have reportedly opposed this proposal. However, IRDAI Chairman T.S. Vijayan had earlier told Cafemutual that distributors should be adequately remunerated. On the exposure draft, Vijayan had said, “The whole idea behind the proposal is to reduce discrepancies in commission payouts across insurance companies and create a level playing field in the insurance distribution space. Not every insurer can pay higher commissions and hence we have suggested a cap.”
Currently, under traditional policies like whole life, money back and endowment policies, insurers who have completed 10 years of operations can pay first year commission of up to 35% while others can pay up to 40% of annual premium. The trail commission on such policies is 7.5% from second to fifth year and 5% thereafter. Under single premium policies, insurers pay one time commission of 2% of premium.
Similarly, under general insurance policies, the commission structure in health, motor, fire and marine insurance are 15%, 10%, 12.5% and 10% of annual premium respectively.
Insurers can deduct up to 90% of premium in expenses in the first year and up to 15% of the renewal premium. For insurance companies that have been operational for lesser than 10 years, the limit is higher.
