Press Trust Of India / New Delhi Oct 09, 2009, 00:45 IST
About 25 lakh life insurance agents have opposed the recommendations of Swarup Committee on elimination of upfront commission paid to advisers. "Implementation of the recommendation will make the role of 25 lakh life insurance agents working with LIC and private insurers redundant and adversely affect crores of people who are dependent on them," Life Insurance Agents' Federation of India President H M Jain told reporters here.
Firms instead of eliminating the commission should look at reducing management expenses and risk premium, he said. The Committee on Investor Awareness and Protection, headed by interim PFRDA Chairman D Swarup, in its consultation paper had proposed elimination of upfront commission paid to insurance agents by April 2011.
"Immediately the upfront commissions embedded in the premium paid (to agents by insurance companies) be cut to not more than 15 per cent of the premium. This should fall to 7 per cent in 2010 and become nil by April 2011," a consultation paper prepared by the committee had said.
Jain said that agents' commission has already come down to 14 per cent in 2008-09. The commission as percentage of total premium is as low as 6.9 per cent.
In country like India insurance was not bought but it was sold, Jain said, adding that the elimination of commission would hurt the industry and starve the nation of long-term capital for development.
yes,load should be removed from insurance policies but not in one phase,it should be over the period of time in step by step manner.Because till that period agent can accept the change which must be done and he can make himself compatible in knowledge wise(product related)which most of agent lack and there should be good advisory from agent to investor and then agent can charge advisory fee for the same.if investor get good product from adviser then i think investor will don't have any problem to give advisory fee to agent.for that agent should have detail knowledge about product and practice in the market for that adviser should do some course like certified financial planner(CFP)or other course which will give adviser detail knowledge about field and investor will get profitable schemes.
The Swarup Commitee is 100% correct when it says that commission embeded in premium leads to misselling. Latest example: New ULIPS from Jan.1 will fetch more returns for customers(due to low cost). But majority of financial advisors(& their CUSTOMER CENTRIC ORGANIZATIONS????) are busy selling old plans to their policyholders. None of them will advice their clients to wait till January(As Low cost means LOW COMMISSION) & Insurance companies will wait till 31st December to withdraw those expensive plans when they can do it right at these moment.
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