IRDAI proposal to put a lower cap of 20% on commissions and remunerations paid to agents and intermediaries under both life and non-life products could lead to faster growth of the insurance market, analysts said.
If implemented, the move would reduce costs for insurers and allow them to make products more affordable.
“Every insurer shall have an explicitly written policy for payment of commission or remuneration or reward to insurance agents and insurance intermediary which shall be approved by the board of the company,” the regulator said in a draft notification issued. The board approval policy shall be reviewed annually, it added.
Terming the move as “major development” for all life insurance companies, industry insiders said the regulations will help life insurers with large bancassurance channels, while smaller firms size may lose market share. The proposed lowering of commissions could be a disincentive for part-time and non-serious participants.
Industry observers also said since the payouts to insurance agents and insurance intermediaries should be made known to the customers under the proposed regulations, customers are going to get the benefit in terms of better service and greater transparency in product understanding.
IRDAI said 20% will be the maximum commission or remuneration, as a percentage of premium that is allowed for life insurance products offered by life insurance companies, for first year premium for regular premium or limited premium payment including deferred annuity/pension. For these types of products, maximum commission for renewal premium should be 10%. For single premium policies, maximum commission for single/first year premium should be 2%, while for group fund based policies it will be only 0.5%.
