IRDAI permits insurers to frame commissions for policyholders, agents
IRDAI has asked insurance companies, including life and non-life, to fix an overall cap on commission payment to agents, brokers and other intermediaries, giving more flexibility to insurers in managing their expenses. This means the regulator has replaced the earlier cap on different commission payments to various types of intermediaries with an overall board approved cap which should be within the allowed expenses. The IRDAI (Payment of Commission) Regulations, 2023, notified on March 26, 2023 is expected to provide more flexibility in product innovation and insurance penetration, insurance officials said. Anil Kumar Aggarwal, MD and CEO at Shriram General insurance, said, “the regulatory change is an eagerly awaited and path-breaking reform by IRDAI. The removal of the cap on commission payments will positively impact the insurance sector.” It will facilitate greater product innovation, development of new product distribution models and lead to more customer-centric operations. It will also increase insurance penetration and provide flexibility to insurers in managing their expenses. Overall, it will smoothen adherence to compliance norms, Aggarwal said. In the case of motor insurance service providers, who are essentially automobile dealers, command higher commission than agents and brokers. IRDAI had earlier allowed insurance companies to pay up to 22.5% of total premium as the commission in two-wheelers and 19.5% of the total premium for other vehicles such as cars and SUVs.
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