Saturday, 17 January 2015
INSURANCE AGENTS COMMISSION NORMS TO BE REVISITED
The Insurance Laws (Amendment) ordinance has omitted section 40A of the erstwhile Act. This means, the Insurance Regulatory and Development Authority of India (IRDAI) has to work on a revised commission structure where the existing norms will be revisited.
Section 40A of the erstwhile Insurance Act pertained to limitation of expenditure on commission. According to erstwhile Insurance Act, no insurance agent would get a commission exceeding 7.5% of the first year’s premium and 2% of each renewal premium payable on the policy, where the policy grants a deferred annuity in consideration or more than one premium.
In cases, where the policy grants an immediate annuity or a deferred annuity in consideration of a single premium, or where only one premium is payable on the policy, it could not exceed 2% of that premium. In any other case, it could not exceed 35% of the first year’s premium, 7.5% of the second and third year’s of the renewal premium and thereafter 5% of each renewal premium payable on the policy.
Provided that in other case referred above, an insurer, during the first ten years of his business could pay to an insurance agent and an insurance agent may receive from such an insurer, 40% of the first year’s premium payable on the policy.
Insurers have proposed to IRDAI that there should be balance between the first year and second year commissions on savings policies. This will motivate the agent to persuade the customer to keep paying the premiums even in the second year, where the cases of lapsation are high.
The traditional product guidelines that were implemented from January 1, 2014, had linked commission to tenure of a policy. Higher the duration, higher is the commission.
In order to retain agents for longer duration, there have been talks about having a fixed salary structure for them. However, not everyone is in favour of such a structure.Insurers say that for large insurers having a large agency force, a fixed salary structure can set them back by a huge expense. They would then have to drastically reduce the number of agents, affecting overall business.
There are also proposals on having a commission expense cap, rather than a fixed percentage of commissions.
For a customer too, if the commission structure is revised, the premiums will also be revised. More balanced commission structure between the first and second year of the premium paying term would mean that the first year premiums would be slightly revised downwards.
posted by:SECRETARY,LIAFI,COIMBATORE DIVISION ON 23/01/2015 AT 6.45pm
No comments:
Post a Comment