IRDAI PROPOSES CAP ON COMMISSION PAYABLE TO INSURANCE AGENTS

Insurance Regulatory and Development Authority of India (IRDAI) has proposed to introduce a new policy to regulate the commission payable to the insurance agents. As per the proposal mooted by IRDAI, the new structure seeks to regulate the upper as well as lower limit for commission payable to the agents.
The new proposal seeks to do away with fixed percentage of commission structure and allow the insurers to determine their own commission structure for the agents as prescribed by IRDAI.
As per the existing payment structure, insurance companies pay as much as 30% commission to the agents from first year’ s premium paid by the insured. While the new structure may result in higher premiums for the policy holders, the upside is that it will put an end to the practice of paying huge commissions to the agents, which may ultimately result in higher returns for persons investing in insurance plans.
As per the new policy, IRDAI doesn’ t want the insurance companies to spend than 10% of all first year premiums collectively and 4% of all renewal premiums on policies granting deferred annuities for more than one premium.