IRDAI vide Circular bearing reference no: IRDAI/F&I/CIR/79/5/2024 dated May 15, 2024 issued Master Circular on Expenses of Management, including Commission, of Insurers, 2024 (“EOM Master Circular”), which repealed the following IRDAI Circulars:
1. Guidance Note – Board Policy of the Insurer on the Commission Structure bearing reference no. IRDAI/INT/CIR/MISC/82/3/2023 dated March 31, 2023.
2. IRDAI (Expenses of Management of Insurers transacting Life Insurance business) Regulations 2023 – Clarification bearing reference no. IRDAI/F&I/CIR/EOM/84/4/2023 dated April 05, 2023.
Major highlights of the Master Circular are as follows:
1. Board-Approved Policy on Commission Structure: Insurers have been directed to develop a board-approved policy for commission payment. The following key elements shall be mentioned in the commission policy:
- a. Objectives and Principles: Goals such as fair competition, customer-aligned incentives, and efficient distribution.
- b. Fairness and Reasonableness: Ensure commissions are reasonable, not excessive, and reflect the effort required.
- c. Good Distribution Practice: Encourage practices enhancing customer satisfaction, market share, and regulatory compliance.
- d. Regular Review: Establish a standard review process by the audit committee, including effectiveness, efficiency, and alignment with customer needs.
- e. Market Conduct: Address governance for ethical practices and conflicts of interest due to commissions.
- f. Monitoring and Reporting: Set reporting requirements for performance and compliance to the board and senior management.
- g. Applicability: Any new commission structure shall not apply to already sold policies.
- h. Commission Structure of Intermediaries: The commission structure aims to foster fair, transparent practices protecting policyholders’ interests and promoting insurance penetration.
2. Business Plan for General/Life/Health Insurers
General Insurers
Health Insurers
Life Insurers
General Insurers shall prepare the Business Plan in the format prescribed under Chapter 2 of the EOM Master Circular.
The Board shall monitor the Business Plan at regular intervals.
Health Insurers shall prepare the Business Plan in the format prescribed under Chapter 2 of the EOM Master Circular.
The Board shall monitor the Business Plan at regular intervals.
Life Insurers shall prepare separate tables for Participating business and Non-Participating business (Including Linked) in the format prescribed under Chapter 2 of the EOM Master Circular, provided the projected capital requirement and solvency ratio may be prepared at the insurer level.
Working Paper(s) with respect to the preparation of Business Plan shall be maintained and be made available to the Authority, if required.
The Board shall monitor the Business Plan at regular intervals.
3. Returns of Expenses of Management:
- a. All the computation of expenses of Management, Income/expenditure accounted on accrual basis and additional allowances towards Insurtech expenses shall be considered by the Authority.
- b. Insurers shall submit returns along with the Statutory Auditor’s certificate as per the Annexures mentioned in the table below to the Board for approval.
General Insurers
Health Insurers
Life Insurers
Annexure I of EOM Circular
Annexure I of EOM Circular
Annexure II of EOM Circular
- c. Approved management expenses returns, accompanied by a certified copy of the minutes of meetings, shall be filed with the Authority alongside annual financial statements.
4. Returns on Payment of Commission: Insurers have been directed to place the returns on payment of commission before the Board for approval and submit the approved documents to the Authority. The formats of the returns shall be as specified in the Master Circular on Submission of Returns.
Source category: IRDAI
Attachments
- /2024/393_Master_Circular_on_Expenses_of_Management,_including_Commission,_of_Insurers,_2024.pdf
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