India Inc has something to cheer about as the Insurance Regulatory and Development Authority (Irda) has modified the insurance brokerage guidelines.
No brokerage will be allowable in respect of insurance business of government and public sector undertakings.
Business from these classes of customers will be placed directly with the insurance companies, wherein they will continue to enjoy a five per cent discount on the basic tariff applicable.
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Corporate India can also continue to enjoy this discount.
Essentially, this means that the status quo remains in the insurance industry with regards to the five per cent direct discount on premium where clients approach the insurance companies directly.
In case of companies with a paid-up capital of Rs 1 crore and above, and co-operative societies with a paid-up capital of Rs 5 lakh and above a discount of 5 per cent on the face of the policy to be given in respect of directly placed business with the insurer.
As an another option, insurers can also pay a brokerage of 12.5 per cent of the premium on business for organisations with a paid-up capital of Rs 1 crore, 7.5 per cent of premium for organisations with a paid-up capital between Rs 1 crore and Rs 25 crore, 5.0 per cent of premium for organisations with paid-up capital of more than Rs 25 crore.
These norms are also applicable for public charitable trusts which are exempt from income tax; and business under the direct control of the government where the policy of insurance shows the interest of the governor of a state or the president of India.
The notification will come into effect from April 1, 2003, and applies to all general insurance contracts. These guidelines will not apply to reinsurance broking contracts.
Brokerage/commission indicated above shall include any royalty, licence fees, administration charges or any compensation which any agreement between the parties provide for intermediation, the notification said.
Irda has so far issued broking licences to 32 entities in the country.