IRDAI may cap first year agent commission at 20 per cent

Insurance regulator IRDAI on Wednesday proposed to cap the reward for individual insurance agents at 20 per cent of first year commission and 40 per cent for intermediaries in an effort to provide level-playing field across segments.

The move is aimed at checking mis-selling of insurance products. According to the exposure draft issued by IRDAI, the reward for individual agents is over and above their commission or remuneration. Corporate agents, brokers and other insurance intermediaries are likely to get much higher rewards than individual agents.

Justifying higher rewards for insurance intermediaries compared to insurance agents, the draft said the former has higher establishment costs and compliance requirements.

Around 20 lakh insurance agents and 10,000 insurance intermediaries working for 24 life insurance companies are likely to be affected by this regulation.

The reward for the renewal of policies in most of the segments has been capped at 10 per cent of the commission. In case of pension products, the reward has been capped at 7.5 per cent for the first year and 2.5 per cent in case of renewals.

Insurance intermediaries include corporate agents, insurance brokers, web aggregators, insurance marketing firms or any other entity as may be recognised by IRDAI.

As a result of the amendments in the Insurance Act, IRDAI has framed draft regulations pertaining to payment of commission or remuneration to insurance agents and intermediaries.