Online players, agents may have to disclose insurance commission

IRDAI is considering a proposal that seeks to have a single limit for expenses made by insurance companies

3 min read Last Updated : Jun 30 2022 | 3:05 PM IST

Online platforms such as Policybazaar, as well as corporate agents, may have to disclose the commissions they receive from insurance companies for selling their policies.

The move is aimed at pushing transparency and customer protection. It would also put an end to misselling of products that have high commission or rewards.

Web aggregators may have to come up with a specific section for ‘insurance policyholder protection.’

They will have to disclose the commission rates and rewards that they are entitled to receive from insurance companies for selling their products. Reporting of commissions may also be made mandatory for corporate agents and brokers.

The Insurance Regulatory and Development Authority of India (IRDAI) is considering a proposal that seeks to have a single limit for expenses made by insurance companies. These will include operating expenses, commissions and rewards given by insurers.

Under the current practice, there is a separate limit for expenses allowed at the business level and for operations, commissions and rewards.

The proposal is to ensure appropriate market conduct and expense management by insurance companies.

Insurers may also have to disclose commission for every policy along with the name of the intermediary.

The step is aimed at making customers aware of what is genuine advice and business interest, an official said.

With appropriate disclosures, customers would have a clear idea whether agents are trying to sell a high-commission insurance product, an official said.

This would also promote a culture where customers would tell aggregators and agents to provide more services such as premium reminders and assistance with documentation, among others, said the official.

Even as there are caps on commissions based on the category of products being sold, web aggregators, agents and brokers are offered high rewards, the official said.

Currently, rewards are given to intermediaries if their revenue from insurance activities is more than 50 per cent of their total revenue.

These intermediaries are entitled to get rewards of not more than 30 per cent as commission or remuneration.

There may be a uniform reward cap for all intermediaries, irrespective of their income from insurance business. It may be limited to 30 per cent.

Moreover, insurance companies cannot offer any rewards to individual employees of intermediaries.

Insurance firms may also not be allowed to provide any other remuneration, directly or indirectly. Non-compliance may invite action from the regulator.