With a rise in sales of regular premium policies, the commission expense of the life insurance industry rose 17 per cent in the last financial year to Rs 18,185 crore, as against Rs 15,529 crore in 2008-09.
According to the annual report released by the Insurance Regulatory and Development Authority (Irda), the expense increase was primarily for regular premium policies. It, however, termed the rise as lower than the increase in the total premium collected.
The commission expense ratio — the ratio of commission expended to the premium underwritten — declined marginally to 6.85 per cent from seven per cent a year ago.
The commission paid on both single and renewal premium products declined.
Insurers pay five to 40 per cent commission in the first year of regular premium policies, two per cent on single premium policies and two-five per cent on renewal premium.
Owing to cost control, operating expenses of life insurers fell to 10.85 per cent from 11.65 per cent in 2008-09. They were Rs 28,807 crore in 2009-10, as against Rs 25,827 crore in the year-ago period.
Life Insurance Corporation of India’s (LIC’s) operating expenses increased to 6.58 per cent, as against 5.76 per cent in 2008-09. The private sector saw a decline to 20.86 per cent, from 25.99 per cent in 2008-09.
Rural, social sector obligations
State-owned New India Assurance failed to fulfill its rural and social sector obligations. HDFC Life missed its social sector obligations, the report said.
Penalty levied by the regulator
Irda penalised General Insurance Corporation (GIC), LIC, HDFC Life, HDFC Ergo, Reliance General Insurance and Apollo Munich.
The report said GIC failed to comply with the provisions regarding the minimum investment in central government securities. The penalty levied was Rs five lakh.
Reliance General was slapped with a penalty of Rs 20 lakh for violating Irda’s regulations and guidelines. HDFC Ergo General and Apollo Munich Health were slapped with fines of Rs five lakh and Rs 10 lakh, respectively, for non-compliance with rural sector obligations.
LIC and HDFC Life were fined Rs five lakh each for not complying with rural sector obligations.
