Irda Cuts Corporate Agency Fees

The Insurance Regulatory and Development Authority (Irda) has reduced the agency commission on tariff business by 50 per cent and 100 per cent.

In a directive, issued on Thursday, the regulator also encouraged the current practice of corporates approaching insurance companies directly and thereby availing of a 5 per cent discount on the premium cost. The directive comes into effective from April 1.

Irda has fixed the agency commission based on the paid-up capital of corporates. For corporates with a capital base up to Rs 10 crore, the commission as a percentage of the business generated from the entity continues to be capped at a maximum of 5 per cent.

 

For corporates having a capital base of Rs 10 to 25 crore, the commission fixed for agents has been lowered from 5 per cent to 2.5 per cent. Agents will, however, not be in a position to earn any commission from corporates where the share capital is in excess of Rs 25 crore. Earlier, the agents could earn 5 per cent commission from large corporates too on all tariff business.

The corporate entities continue to have the privilege of getting a discount on the premium up to 5 per cent should they approach insurance companies directly. "In all cases where agency commission is not paid, a discount of 5 per cent of the premium can be allowed and indicated as such in the policy documents," said Irda chairman N Rangachary.

The Irda move in cutting the agency commissions may deal a blow to the fledgling insurance agency industry. The revised rate of commission does not make it worthwhile for anybody to pursue the career of a professional agent, said Fali Poncha, a stalwart in the insurance sector. "He is almost restricted to writing business of individual personal lines," he added.

The move has surprised agents as the regulator has been pressing for professionalising the agency force. It is also supportive of corporate agents entering the insurance segment as well as encouraging the bancassurance route to push penetration of insurance in the country.

"Today, life insurance agents get a commission of 40 per cent in year one and an additional annual 8 to 10 per cent in subsequent years on renewal of policies. Here we are not even sure of getting any commission as corporates have the choice of approaching insurance companies directly," said Nitin Dossa, president of General Insurance Agents' Association of India.