“Insurance Regulatory and Development Authority of India (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016” outlines the framework for the payment of commissions, remuneration, and rewards to insurance agents and intermediaries. Here’s a detailed summary of the regulations:
General Provisions
Title and Commencement: These regulations are formally titled as stated above and came into force on April 1, 2017.
Definitions: Key terms are defined, such as “Commission,” “Remuneration,” “Reward,” “Insurance Intermediary,” and others relevant to the insurance industry.
Scope and Applicability
Scope: These regulations cover the payment terms for commissions, remuneration, and rewards to agents and intermediaries involved in insurance distribution.
Exclusions: The regulations exclude certain products like micro-insurance as defined in other IRDAI regulations.
Overrides: These regulations supersede certain parts of earlier IRDAI regulations regarding linked and non-linked insurance products.
Payment Policies
Board Approved Policies: Insurers are required to have board-approved policies detailing payment structures for agents and intermediaries.
Policy Contents: Must include terms for the payment of commissions and rewards, conditions for renewals, termination details, and product-specific selling restrictions.
Filing Requirements: Insurers must file these policies with IRDAI at the start of the financial year and report any amendments within 30 days.
Commission and Remuneration Structures
Setting Rates: Commissions and remuneration are to be decided based on the insurer’s board-approved policies. These payments must align with caps specified in various schedules of the regulations.
Schedules: Detailed schedules (I to IV) specify the maximum commission or remuneration percentages applicable to different types of insurance products, including life, health, general, and motor insurance.
Direct Sales: No commissions or remuneration are payable for policies procured directly by insurers without the involvement of agents or intermediaries.
Rewards System
Criteria and Limits: Rewards to agents and intermediaries are based on objective and transparent criteria set by the insurer’s board and are capped at a percentage of the commission or remuneration paid.
Distribution Channels: Rewards are differentiated based on the revenue model of the intermediary, with specific restrictions on entities whose non-insurance revenue exceeds fifty percent of their total revenue.
Reporting and Compliance
Annual Returns: Insurers must submit annual returns detailing all payments made to agents and intermediaries. These returns are reviewed by the insurer’s audit committee and approved by the board.
Format: The regulations specify the format and content of these returns, ensuring comprehensive disclosure of compensation details.
Enforcement and Amendments
Penalties: Non-compliance with these regulations can result in penalties as per the provisions of the Insurance Act.
Authority’s Power: IRDAI retains the power to issue clarifications and directions to resolve any issues in the interpretation or application of these regulations.
These regulations aim to ensure transparency and fairness in the payment practices related to insurance distribution, aligning agents’ and intermediaries’ compensation with their contributions to insurance sales and service. They provide a structured approach to compensating these key stakeholders while ensuring that their activities contribute to broader goals such as increased insurance penetration and efficiency.
