IRDA blocks move to cut agent fee
Efforts to reduce the hefty commissions to agents from the premium contributions of insurance buyers have received a setback as a six-member inter-regulatory panel set up to look into it could not agree on the issue due to resistance from the insurance regulator. The panel on investor awareness and protection, headed by D Swarup, chairman, Pension Fund Regulatory Development Authority, was considering replacing agents’ commission embedded in the premium with a fee-based system.
It will now give its report in the next ten days, but with a dissent note from IRDA, which does not support the proposal. “The committee on investor awareness may have to give its report with a dissent note from the insurance regulator. The government, however, can accept the recommendation of the panel despite the dissent note,” said one of the panel members, who asked not to be named.
IRDA is not in favour of the committee’s idea to phase out insurance agents’ commission as it feel the move could undermine the attempts to increase insurance penetration. Agent’s commissions could be as high as two-fifth of the first year’s premium paid by the insurance buyer. The commission passed on by the insurance provider, often without the knowledge of investor. Because of the stiff opposition, the panel has decided to make a distinction between pure insurance products and those like ULIPs, which have an investment element in it.
The panel wants to gradually replace the embedded commission in the case of ULIPs with a fee and reduce the commission on pure insurance products to 5% which could continue till access to insurance products in rural areas become satisfactory.
Source - economictimes.com
