The Insurance Regulatory and Development Authority of India (IRDAI) has issued a statement setting out new commission rates to be paid to insurance intermediaries including corporate agents, insurance brokers, web aggregators and insurance marketing firms, reported India’s The Financial Express.
The IRDAI said it hopes the new commission structure, which applies to both life and non-life policies, will increase insurance penetration and density in India by incentivising insurance intermediaries.
It come as India’s life industry continued to see strong growth in December 2016 as private insurers reported higher than expected growth at 26% year-on-year, according to a recent report by Kotak Institutional Equities Research, Life Insurance Corporation of India (LIC). Annual premium equivalent (APE) also grew 8% year-on-year in December.
The regulator will also require every insurer to stipulate its policy for payment of commission or remuneration or reward to insurance agents and insurance intermediaries that will have to be approved by the board of the company.
Life insurance commission
For single premium category, broker will get a 2% commission for selling individual life products, 7.5% for individual pure risk products, 2% for individual immediate and deferred annuity products and 5% for group pure risk products, said the IRDAI.
For regular premium products, there are two categories: pure risk and other than pure risk or those bundled with investments.
The first-year commission for individual pure risk or term plan will be 40%, and 10% will be paid to the agent for every renewal premium.
In case of non-pure risk cover, the commission rate for the first five years will be 15% and will rise to 35% for policies over 12 years.
In addition, brokers will also get commission on renewal premium, which is 7.5% every year – meaning that by the year 12, a broker would be earning a commission of 42.5%.
The move is in stark contrast to the rest of the world, with commission payments on life policies being banned in the UK since 2013 when the Retail Distribution Review (RDR) was introduced.
More recently, regulators in the United Arab Emirates (UAE) are looking to crackdown on fees and upfront comission, while Singapore imposed a 55% cap on upfront commission on 1 January.
