Insurers may have to lower agent commission for certain products
Insurers may soon have to lower commissions to insurance agents in certain product categories, such as participating products even as they are faced with high agent attrition.
Incidentally, to improve the returns on insurance products, the Insurance Regulatory and Development Authority of India has approved a proposal to bring down insurers’ overall expenses by around 15 per cent, said Nilesh Sathe, Member-Life, IRDAI.
“If insurers breach the expense limits defined by the regulator, the excess payout will have to come from the shareholders’ fund and not from the policyholders’ account,” Sathe added.
Sathe said that while the regulator has not asked insurers to reduce commission payouts, insurers will have to comply with the expense limit regulations and bring down administrative expenses.
Arijit Basu, MD and CEO, SBI Life Insurance, said that the challenge for many insurers will be to manage commission payouts to agents within the expense limit.
Industry experts say that while the regulator had streamlined other product categories, such as unit-linked products where the commission payout is restricted and clearly defined in the benefit illustration, the expense limits are likely to impact their marketing budgets and commission payout in categories such as participating products where the charges are ambiguous.
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