The maximum commission allowed for non-life products is estimated at 20% of the total written premium in India in that financial year.
IRDA has asked insurance companies that their commission and remuneration payments should be based on a board approved policy, which will be reviewed on an annual basis. No commission shall be payable to insurance agents or insurance intermediaries in direct business, and premiums shall be discounted to insurers.
Considering the positive side of the new regulation, insurers said that insurance companies which were spending more on sales using the marketing route can now spend money commissions, “Public sector companies have higher salary to premium ratios, but they are not much different from private players in management expenses. This is because private companies spend more in promoting sales, which is not reflected in the commission expenditure,” TOI quoted an official as saying.
New rules State that the commission cap will remain in place but, from now on 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 businesses at lower commissions will have more headroom than a company with more individual health insurance businesses. Some insurers feel that even though limits are set at the portfolio level, the rules should not mix wholesale and retail portfolios to calculate commission limits.
Earlier, there were suggestions from some industry members to disclose the commission, and IRDA has clarified that it is not allowing such disclosures. But with commission free, insurers are saying again that, at least in wholesale trade where buyers negotiate, insurers should be asked to disclose commissions.
(with inputs from TOI)