The Insurance Regulatory and Development Authority of India (IRDAI) has issued a notification outlining guidelines on commissions paid by insurers. According to this, every insurer will be mandated to have a written policy approved by the board for the payment of commissions.
The new policy will come into effect from April 1,
IRDAI said.
In framing this policy, insurers will be required to consider several key factors, ensuring that it aligns with various aspects for the benefit of policyholders, the insurance industry, and intermediaries.
Key points from the notification include:
Structured commission payments: The policy must include the structure of commission payable, ensuring transparency and clarity in payment mechanisms.
Policyholder interest: The commission payment policy should be designed in the interest of policyholders, aiming to provide them with the best value and benefits.
Insurance penetration and density: Insurers are encouraged to frame their commission policies in a way that contributes to increasing
insurance penetration and density in the country.
Alignment with policy nature and tenure: The commission structure should be commensurate with the nature and tenure of the
insurance policy, ensuring fairness in compensation.
Agent and intermediary protection: The policy should protect the interests of insurance agents, intermediaries, and insurance intermediaries.
Business strategy alignment: Commission payment policies should align with the insurer's overall business strategy.
Administrative simplicity and cost-effectiveness: The policy is expected to be simple to administer and cost-effective.
The notification further emphasises that the board-approved policy for commission payments shall be subject to periodic review to ensure its continued relevance and effectiveness.
Additionally, insurers will have the option to subsume the policy for commission payments within the board-approved policy for Expenses of Management.
