Insurance regulator IRDAI has removed the product-wise cap on commission payable by Life, General and standalone health insurers to intermediaries and instead notified that such payments will come under the expense of management (EOM) limits.
The commission payable by insurers to insurance agents or insurance intermediaries should not exceed the EOM limits specified. Health insurance policies offered by Life and General insurance companies will also come under the ambit of the new regulations which come into force from April 1, IRDAI said, notifying a regulation each on EOM and payment of commission.
“The shift from product-level commissions to a company-wide limit of expenses, as proposed, will ensure parity across varying business models while rendering greater flexibility in managing expenses for insurers,” Bajaj Allianz General Insurance MD and CEO Tapan Singhel said.
On the EOM limits, he said, “with majority of the insurers above prescribed norms of expenses and with the industry reeling with a combined ratio of more than 118%, the EOM limits will help in bringing cost discipline… translate into better pricing and products for customers in the medium to long term.”
IRDAI said the objective of the new regulation on commissions is to provide insurers flexibility to manage expenses based on their growth aspirations and ever-changing insurance needs in the backdrop of improving insurance penetration. It also intended to enhance the responsiveness of the regulation to market innovation, and facilitate the insurers in development of new business models, products, strategies, internal processes and enable easy compliance. Insurers will be required to have a Board-approved policy for payment of commission, the regulator said.
