Exposure Draft – IRDAI (Payment of Commission) Regulations_ 2022

IRDAI has issued an revised Exposure Draft – IRDAI (Payment of Commission) Regulations, 2022 dated November 23, 2022 (“revised Exposure Draft”) with an objectives to enhance responsiveness of the regulation to market innovation, facilitate the insurers in development of new business models, products, strategies and internal processes and to provide the insurers the flexibility to manage their expenses based on their growth aspirations and ever changing insurance needs to improve insurance penetration.

Background – The Exposure Draft – IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2022 was earlier issued on August 23, 2022 for stakeholders comments. Basis the comments received and considering major changes carried out the Revised Exposed Draft is placed by the Authority for seeking comments of the stakeholders.

Highlights of the revised Exposure Draft are as follows:

• The revised Regulation shall be called the IRDAI (Payment of Commission) Regulations, 2022, it shall come into force from April 1, 2023 and shall be reviewed once in three years from date of its notification.
• ‘Commission’ means any compensation paid by an insurer to insurance agent or intermediary or insurance intermediary, as applicable, for soliciting or procuring or transacting insurance business.
• The proposed regulation requires insurers to have Board approved policy for Payment of Commission which shall be reviewed periodically.
• The policy shall inter-alia take into consideration the following;
• Interest of policy holders and insurance penetration
• Nature and tenure of policy
• Interest and enhancement of the performance of Agents & Intermediaries
• Business strategy
• Simplification of administration of business and cost effectiveness
• It is proposed that the maximum commission payable by Insurers must be in accordance with the following norms:
• For life insurance (including health insurance products offered by Life Insurers) the maximum commission shall not exceed Expense of Management (EOM) limits specified under IRDAI (Expenses of Management of Insurers transacting life insurance business) Regulations, 2022.
• For general insurance (including health insurance products offered by General Insurers) and health insurance offered by standalone health insurers the maximum commission “shall not exceed Expense of Management (EOM) limits specified under IRDAI (Expenses of Management of Insurers transacting General or Health insurance business) Regulations, 2022”
• Insurers to submit the returns on payment of commission within 45 days of the expiration of each financial year and such returns are to be reviewed by the Audit Committee prior to being placed for approval of the Board of the Insurer.

Source category: IRDAI

Attachments

• /2022/117_2022-11-23_FW__Exposure_Draft_–_IRDAI_(Payment_of_Commission)_Regulations__2022.pdf