INSURANCE
Irdai removes individual ceiling of commission to be paid by insurers for sale of products
Mar-29-2023

The Insurance Regulatory and Development Authority of India (Irdai) has removed the individual ceiling of commission to be paid by insurers for the sale of their products. The board of an insurance company should frame commission policy keeping in mind the interest of the policyholders and agents. Flexibility in commission is also aimed at increasing insurance penetration and bringing cost efficiencies. The commission fixed by the board of an insurer must be within the allowable expenses of management (EoM) limit. These Regulations shall be called the Insurance Regulatory and Development Authority of India (Payment of Commission) Regulations, 2023. These regulations will come into force from April 1, 2023.

As per the regulator, the total commission payable under life insurance products, including health insurance products, should not exceed the Expense of Management (EOM) limits specified under the above regulations. It said ‘The total amount of commission payable under general insurance products, including health insurance products, offered by general insurers and health insurance products offered by standalone health insurers shall not exceed the EOM limits specified under Insurance Regulatory and Development Authority of India (Expenses of Management of Insurers transacting General or Health Insurance business) Regulations, 2023, as amended from time to time’.

It further said that these regulations would be reviewed once in every three years from the date of notification unless the review or repeal or amendment is warranted earlier. So far, commissions for the product were approved by the insurance regulator, depending on the policy. About the objective of the amendment, it said, this will help enhance the responsiveness of the regulation to market innovation. It will facilitate the insurers in the development of new business models, products, strategies, internal processes and enable easy compliance with the regulations while fulfilling the regulatory objectives. Besides, it will provide the insurers with the flexibility to manage their expenses based on their growth aspirations and the ever-changing insurance needs with an objective to improve insurance penetration.

  RELATED NEWS >>