IRDAI has introduced direct plans in insurance from April 1, 2023.
The insurance regulator has asked insurance companies – life, non-life and standalone health insurers to devise a board approved policy for directly sourced policies. Insurers will have to define a manner in which they will reduce premium if a policy is sourced directly to a policyholder.
In a gazette notification, IRDAI said, “Every insurer shall have a well-documented policy approved by its board on annual basis, which shall, specify manner of transfer of benefits, arising from reduction of expenses and/or from directly sourced business to the policyholder by the way of reduction in premium.”
With this, insurance companies will have to reduce the premium if policyholder buys an insurance policy directly from an insurer. Such a reduction will happen from expenses of management which includes agents commission.
So far, while insurers are allowed to sell insurance policies directly to the policyholders, there is no reduction in premium. However, IRDAI has now clarified that insurers will have to pass on this benefit to the policyholders.
Among other key instructions to the board of insurance companies are:
v Make well defined policy on structure of commission of agents/brokers
v Implement measures to reduce cost and expenses of management on annual basis
v Implement manner of computation of additional allowance
v Ensure compliance with the IRDAI norms
Further, IRDAI has asked insurers to devise business plan keeping in mind their capital requirements, projection of solvency margin and protection of expense of management.
