IRDAI has issued an Exposure Draft – IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2022 dated August 23, 2022 with the 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.
The Draft Regulations proposes to repeal existing norms on payment of commission, remuneration and reward to insurance agents and insurance intermediaries, inter alia, the IRDAI (Payment of commission or remuneration or reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016 and amendments made thereto.
Highlights of the Exposure Draft are as follows:
- The Draft Regulations are proposed to remain in force for a period of 3 years from the date of publication in the Official Gazette.
- Every Insurer to have an “explicitly written policy” for payment of commission or remuneration and rewards to Insurance Agents and Insurance Intermediaries which shall be approved by the Board of Directors and reviewed annually based on the experience and such policy must specify amongst other prescribed details, percentage of maximum commission or remuneration payable under each line of business.
- It is proposed that the maximum commission or remuneration or reward payable by Insurers must be in accordance with the following norms:
- For life insurance (including health insurance products offered by Life Insurers): (i) if actual Expenses of Management (EOM) in the preceding financial year do not exceed 70% of the allowable EOM limits, then the Life Insurer can choose (with the due approval of the Board of Directors) to apply the commission limits set out in Schedule I to the Draft Regulations or apply the commission limits set under the Board approved policy; or (ii) if actual EOM in the preceding financial year exceeds 70% of the allowable EOM limits, then Life Insurer is required to comply with the limits set out in Schedule I to the Draft Regulations.
- For general insurance (including health insurance products offered by General Insurers) the maximum commission or remuneration and reward “ shall not exceed 20 percent of the gross premium written in India in that financial year ”.
- For health insurance offered by standalone health insurers the maximum commission or remuneration and reward “shall not exceed 20 percent of the gross premium written in India in that financial year”.
- The Draft Regulations does not apply to micro-insurance products, government insurance schemes where commission or remunerations is specified in the Government Scheme/Notification and other products as may be specified. Further where a policyholder directly procures a policy from an Insurer, then the Insurer cannot pay any commission or remuneration on such policy to any Insurance Agent or Insurance Intermediary and in such cases, the Insurer shall necessarily grant a discount on premium as specified under the Board approved policy.
Insurers to submit the returns on payment of commission, remuneration and reward 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
- /2022/80_EXPOSU~11.PDF
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