In a significant move, IRDAI has given insurers more freedom to offer commission to intermediaries. Insurers can now have a board-approved policy to determine the commission they pay to intermediaries subject to overall limits of expenses of management (EOM).
Currently, Insurance companies have a wide range of commission limits prescribed by IRDAI, depending on the type of intermediary and the insurance product sold.
The payout of agency commission has been a big issue with Regulator, Insurers and Intermediaries. It has been alleged that many insurers are paying extra commission over and above as mandated by IRDAI and this leads to booking the expenses through some other heads. Recently the GST department also booked several insurers for fake billing and claiming input.
The new advisory may solve this problem if the insurers are allowed to fix own remuneration structure according the business generated by the intermediary.
However the Insurers must adhere to the overall cap of management expenses. The Insurers may reward the channels which are better performing and focus on growth. The shift from product-level commissions to a company-wide limit of expenses, will ensure parity across varying business models like Broking, Bancassurance, Agency and other channels.
Overall IRDAI has been very proactive during the last one year and is focussing on growth and reducing regulatory compliances so that there is ease of operation and Insurers get more playground to expand the penetration. IRDAI must also plan to be more accessible to Intermediaries and consumers so that they may air their grievances and reach out with their suggestions.
IRDAI has constituted many working groups which will help to identify the industry requirements and iron out anomalies if any.
In the third Bima Manthan session recently held in Hyderabad, IRDAI stressed bringing EASE or Enhanced Access and Service Excellence for insurance services delivery in line with the banking industry. It said it wants to create an environment that provides policyholders the ease of approaching an insurance company for purchasing, servicing, or receiving claims or lodging grievances. IRDAI said that insurance companies must strive to provide maximum excellence in their service delivery.
