Insurance Advisory Committee (IAC) is likely to submit its recommendations on the new commission structure to IRDAI soon. IRDAI Chairman T S Vijayan said that they will finalize the commission structure of agents and brokers based on IAC’s recommendations. He was speaking to media on the sidelines of ASSOCHAM 9th Global Insurance Summit held in Mumbai today.
Vijayan said that the insurance regulator will take up this issue in the forthcoming board meeting scheduled to be held in October.
Vijayan said, “We will be able to finalize the final guidelines on the new commission structure in the next board meeting. We have already received feedback from all stakeholders which we have shared with the Insurance Advisory Committee.”
IRDAI’s Insurance Advisory Committee was constituted in 2000 under the chairmanship of C Rangachary. The committee was reconstituted in 2016. The committee advises IRDAI on development, disclosures and regulatory aspects of the insurance industry.
Earlier in January, IRDAI had proposed to hike the first year commission (upfront commission) in pure risk policies like term insurance plans having premium paying term of over 12 years to 50% of annual premium. Also, IRDAI has proposed that the first year commission in term policies having premium paying terms between 5 to 11 years be increased to 40% of annual premium. Currently, the first year commission payouts under such policies range between 20%-35% of annual premium.
In addition, trail commission or commission on renewal of policies has been proposed to be increased from 5% to 10% of annual premium under term insurance policies. Under group term plans, insurers can pay up to 10% of annual premium not exceeding Rs.10 lakh as upfront as well as trail commission.
The regulator has proposed to keep the commission structure unchanged for traditional policies, annuities and single premium policies.
Similarly, for non-life policies, IRDAI has proposed to hike commissions on motor insurance policies from third year of renewal. Also, IRDAI has proposed to reduce the difference between the commission payouts in health insurance policies issued by life insurance companies, general insurance companies and standalone health insurance companies.
Last month, T S Vijayan had told Cafemutual that the insurance regulator is likely to finalize the commission structure of agents soon. He also emphasized on the need to compensate agents adequately to increase insurance penetration. “A lot of debate has been going on high upfront commission of distributors. However, I have a different view on this. I think agents should be compensated in such a way that she should find insurance an attractive career option,” said Vijayan.
