Irdai draft norms do away with specific caps on commissions to agents

Proposes that commissions to agents can't exceed management expense limit

After consultations with the insurance industry, the regulator has done away with the specific caps on commissions to agents and intermediaries that it had proposed in an exposure draft in August.

Instead, it has suggested that the commissions paid by insurance companies, both life and non-life, should not exceed the expense of management (EoM) limits specified under the respective regulations framed for life and non-life industry.

In the earlier version of the draft, the Insurance Regulatory and Development Authority of India (Irdai) had proposed that the maximum commission payable under general insurance products, including health insurance products offered by general insurers, should not exceed 20 per cent of the gross premium written in that financial year. The same limit was proposed for health products sold by standalone health insurers.

However, in the revised draft, the regulator has said the commission payable under general insurance products, including health insurance products offered by general insurers and health insurance products by standalone health insurers, should not exceed the EoM limits specified by the regulator. 

Under the revised EoM guidelines, which will come into effect from April 1, the regulator has proposed a limit of 30 per cent of gross written premium written in that financial year as EoM limit for general insurers and 35 per cent in case of standalone health insurers.

The existing EoM limits are based on the business segment and volumes, and a blended EoM cap would work out to be around 31 per cent for multi-line general insurers and around 33 per cent for standalone health Insurers. The current commission and rewards put together entail approximately 18-19 per cent, except the motor TP line, wherein commission rates are nil in the first three years and 2.5 per cent thereafter.

When it comes to life companies, the previous draft proposed to link commissions to EoM, wherein if the actual EoM in the previous financial year is not exceeding 70 per cent of the allowable EoM limits then life insurers can adopt commission limits as approved by its board. But, if the EoM is exceeding 70 per cent of the allowable limits, then the insurer must adhere to caps on commission proposed by the regulator.

However, the revised draft has suggested that commission payable under life insurance products, including health insurance products offered by life insurers, cannot EoM limits, proposed by the regulator under Irdai EoM regulations 2022, which will be effective from FY24.

Irdai has revised the draft guidelines on EoM limits for both life and non-life industry. The regulator has specified that there will be no variable pay for whole-time directors, chief executive officers, managing directors if actual expenses for the said financial year exceed the business plan by 10 per cent or more. Also, insurers who are not compliant with limits prescribed by the regulator have to give a glide path of three years up to FY25-26.  

Use HPR to build doctors’ network: Irdai to insurers 

Irdai has asked insurers to leverage the Health Professional Registry (HPR) to build a network of doctors or other health care professionals for providing OPD and other health services. As part of the Ayushman Bharat Digital Mission, National Health Authority has incorporated a HPR, a comprehensive repository of registered practitioners of healthcare professionals.

"The General and Health Insurers offering health insurance policies can also consider leveraging on the Health Professional Registry for building up the network of doctors/physicians or other health care professionals for providing OPD or other healthcare services," Irdai said.    PTI