& #39;Spread Agent Fee Over The Years & #39;

Irda chairman N Rangachary today suggested that life insurers spread the commission paid to agents over a period of time to reduce instances of rebating and policy lapses.

"Due to the high commission rate prescribed in the initial years of a policy, we find the lapse ratio increasing. The agents in order to maximise their gains would try and cancel policies," Rangachary said at the sixth international conference on insurance organised by Ficci.

He said that if companies adopt a system of equated commission payment, with the total commission spread over 10 years, the agents would take care of the clients.

 

The industry has been complaining of increased policy lapses as some agents ask their customers to close a policy after, say, payment of two years premium since the premium goes down from the third year. Insurance companies had sought a review of the clause which prohibits agents from passing on the commission to policyholders.

Rangachary also said that the agents should be involved by companies in devising new products.

"If an agent finds that his company is not producing products demanded by the market, he should come back to the insurer and tell them what is in demand. Agents have to be the eyes and ears of insurers," he said.