Insurance News: Insurance agents decry move to cut commission

Close to 5,000 insurance agents in the city are up in arms against what they call a draconian step by the central finance ministry to cut their commission to 5%.

The General Insurance Association (GIA) members in Mumbai have made a written appeal to finance minister P Chidambaram to stop the step-motherly treatment meted out to the agents of public insurance companies.

Earlier they used to earn up to 15% commission on annual premium paid by every health insurance policy holder in the public sector.

But citing heavy losses incurred by the four state-owned firms — New India Assurance, United India, National India and Oriental India Insurance — the ministry wants public sector insurance companies to restrict brokerage and commission of the agents to a maximum of 5% of the premium paid by the client.

“For example, for a sum assured of Rs1 lakh on a health insurance policy, a client pays Rs1,000 as an annual premium. At 15%, the agent garners a commission of up to Rs150 on the premium paid. The ministry has instructed that this commission be restricted to 5%, which is barely Rs50,” explained Prahlad Mali, vice-president, GIA, Mumbai.

“An average public insurance company agent earns between Rs3 lakh and Rs 5 lakh a year. If the commission is cut to 5%, his earnings will dip below Rs 2 lakh,” said an agent with New India Assurance.

The agents of public insurance firms are upset as the commission of their counterparts in private insurance firms is not being slashed.

They claimed that demotivating public insurance company agents is a strategy by the finance ministry to privatise the health insurance sector.

The agents also pointed out the situation will result in them not being interested to serve their clients better.

“In case of an emergency or hospital admission procedure, clients approach the agent for completion of formalities and peripheral help. Earlier, I used to willingly stand behind my client and pursue the insurance company to settle the claim as early as possible. But if my earnings take a hit, I won’t bother about the client,” said an agent from National India Insurance.