 "'Don't pass rise in commission to policyholders'")
Insurance Regulatory and Development Authority Chairman T S Vijayan has said if the cap on agent commission is removed, as proposed by the Insurance Bill, companies will be free to decide the amount. He added in case the commission rose, the increase shouldn't be passed on to policyholders.
The Insurance Bill proposes to remove the cap on agent commission, currently fixed at 40 per cent of the first-year premium.
At a seminar organised by the Federation of Indian Chambers of Commerce and Industry here on Monday, Vijayan said, "We cannot fix the minimum wage. The freedom to fix the commission will be given to the company. There will be a cap on expenses, but not how much to give agents, etc. We are going to free everything. If the company wants to give high commission, let them take shareholders' money. Don't touch policyholders' money. This is dependent on how the Bill shapes up."
To improve insurance penetration, Vijayan urged insurance companies to launch small-ticket policies with small premium. While annual premium is currently in the range of Rs 5,000-10,000, there is a need for policies with premium of Rs 2,000-3000. "Just as the Jan Dhan Yojana has become a campaign for everyone to have a bank account, a similar campaign is required for everyone to have insurance," he said.
He added to simplify insurance-buying, a central registry for know-your-customer (KYC) norms was needed so that insurance firms could tap into this. This would ensure if KYC norms were followed once, there was no need to do it again.
On a proposed rise in foreign direct investment in the insurance sector to 49 per cent, Vijayan said this would help the segment. "About 25 million Indians are becoming adults every year, they are potential customers. Also, the number of new vehicles coming on roads every year is huge. So, the number of policies to be sold is phenomenal," he said.
The Insurance Bill proposes to remove the cap on agent commission, currently fixed at 40 per cent of the first-year premium.
At a seminar organised by the Federation of Indian Chambers of Commerce and Industry here on Monday, Vijayan said, "We cannot fix the minimum wage. The freedom to fix the commission will be given to the company. There will be a cap on expenses, but not how much to give agents, etc. We are going to free everything. If the company wants to give high commission, let them take shareholders' money. Don't touch policyholders' money. This is dependent on how the Bill shapes up."
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The Bill proposes a limit on the management expenses of insurance companies. The cap will take into account current premia in new business, bonus loading, expenses and the rate of interest.
To improve insurance penetration, Vijayan urged insurance companies to launch small-ticket policies with small premium. While annual premium is currently in the range of Rs 5,000-10,000, there is a need for policies with premium of Rs 2,000-3000. "Just as the Jan Dhan Yojana has become a campaign for everyone to have a bank account, a similar campaign is required for everyone to have insurance," he said.
He added to simplify insurance-buying, a central registry for know-your-customer (KYC) norms was needed so that insurance firms could tap into this. This would ensure if KYC norms were followed once, there was no need to do it again.
On a proposed rise in foreign direct investment in the insurance sector to 49 per cent, Vijayan said this would help the segment. "About 25 million Indians are becoming adults every year, they are potential customers. Also, the number of new vehicles coming on roads every year is huge. So, the number of policies to be sold is phenomenal," he said.