Industry majors welcome Irdai move to remove cap on agent commissions
Insurance regulator has replaced earlier cap on commission payments with overall cap on expenses; move is seen to provide more flexibility to insurers in managing their expenses
Industry majors have welcomed the move by the Insurance Regulatory and Development Authority of India (Irdai) to remove the cap on commission payments to agents, aggregators and brokers.
Under the Irdai (Payment of Commission) Regulations, 2023, notified on Tuesday, the insurance regulator has replaced the earlier cap on commission payments with an overall cap on the costs incurred by insurers. The move is widely believed to provide more flexibility to insurers in managing their expenses.
“The regulatory change is an eagerly awaited and path-breaking reform by Irdai. The removal of the cap on commission payments will positively impact the insurance sector. It will facilitate greater product innovation, development of new product distribution models and lead to more customer-centric operations. It will also increase insurance penetration and provide flexibility to insurers in managing their expenses. Overall, it will smoothen adherence to compliance norms,” said Anil Kumar Aggarwal, managing director and chief executive officer at Shriram General insurance.
Under the rules, every insurer shall have a written policy for payment of commission, which shall be approved by the insurer's board. The total amount of commission payable under life insurance plans, including health insurance offered by life insurers shall not exceed the specified Expense of Management (EOM) limits, said the notification.
“This is a good development for our company. Agents will be happy, because when they bring more business they will get more commission. The 15 per cent cap on commission has been raised to 35 per cent for health and 30 per cent for the non-life segment. This is beneficial for policy holders too, as overall premium depends on overall pooling and responsible players will maintain a good pool,” said V Jagannathan, Chairman, Star Health & Allied Insurance.
To read the full story, Subscribe Now at just Rs 249 a month