Irdai provides more flexibility to insurers, eases limits for commissions

The Insurance Regulatory and Development Authority of India (Irdai) on Thursday provided insurers with more flexibility in paying commission by linking limits to the overall portfolio and company management expenses, according to a TOI report.

The utmost commission sanctioned for non-life products has been pegged at 20% of the gross written premium in India in that financial year.

The insurers have been told by Irdai that their commission and remuneration payout should be based on a board-approved policy which will be reviewed on a yearly basis. No commission shall be payable to insurance agents or the insurance intermediaries in the direct business, and the insurers must grant discounts on the premium.

Considering the positive side of the new regulation, the insurers said that insurance companies which were spending more on sales using the marketing route could now spend the money on commissions. “Public sector companies have a higher wage to premium ratio, but they are not very different from private players in management expenses. This is because private companies spend more promoting sales, which is not reflected in commission expenses,” TOI quoted an official as saying.

The new regulations state that the commission limit will stay but, henceforth, it will be at the portfolio level limit and not an individual line of business. This means that a company that does more group health business at a low commission will have more headroom than a company with more individual health insurance businesses. Some insurers feel that even if limits are set at the portfolio level, regulations should not blend wholesale and retail portfolios for calculating commission ceiling.

Earlier, there was a suggestion from some industry members to disclose commissions, and the Irdai has clarified that it is not allowing such disclosures. But with commissions being freed, insurers are again saying that, at least in the wholesale business where buyers negotiate, insurers should be asked to disclose commission.

(With inputs from TOI)