Agency Commission cap removal to aid PSU banks

The insurance regulator’s decision to free commissions will benefit public sector banks (PSBs) as they have received lower fees than other intermediaries for selling policies.

Recently, IRDAI replaced its prescribed commission cap with a board-approved commission policy subject to an overall cap on their expenses of management. According to industry insiders, although the commission cap has existed, companies have been working around the rules to pay higher compensation to private distributors under other heads of expenditure.

Now, there is an overall cap of 30% on management expenses for general insurers and 35% cap for standalone health insurers.

In the case of private companies, actual expense of management are much lower because of higher productivity.