The new norms on commission payments to insurance agents and other intermediaries issued by the Insurance Regulatory and Development Authority of India (IRDAI) are expected to result in more competitive premiums in the insurance market, according to industry experts.
“The recent circular is a significant step forward for the insurance industry. It ushers in a new era of transparency and efficiency, benefiting both insurers and policyholders. We view this as a catalyst for positive change. The circular promotes fair commission structures, leading to potentially lower premiums for our customers,’‘ Sharad Mathur, Managing Director & Chief Executive Officer, Universal Sompo General Insurance Company told businessline.
The new norms also mandate it clear that board-approved policies ensure intermediaries act in their best interests. ”This focus on ethical conduct and strong governance minimizes conflicts and builds trust. As the circular outlines, regular reviews and oversight are crucial for continuous improvement. This circular marks a turning point for the insurance landscape,’‘ Mathur added.
According to Aditya Mall, Appointed Actuary, Future Generali India Life Insurance, the new norms attempt to enforce fair and reasonable commission structures, thereby reducing excessive payouts. This circular aims to create cost efficiencies that could result in more competitive premium rates over time.
`The impact of this regulation extends beyond premium adjustments. It mandates insurers to establish transparent, board-approved commission policies that align intermediary incentives with customer interests, fostering ethical conduct. Regular reviews and stringent oversight will help insurers optimize expense management, ensuring compliance and adaptability to market conditions,’‘ he said.
Experts say, enhanced governance and detailed reporting would increase accountability and transparency, contributing to a more trustworthy and customer-centric insurance industry, say experts.
Last week, IRDA directed all insurers to have a board-approved policy on the commission structure for insurance agents to ensure fairness and reasonable payments.
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``As the Insurance Agents, Intermediaries or Insurance Intermediaries play a crucial role in the distribution of insurance products, it is essential for the insurers to have a clear and transparent board policy on their commission structure to ensure fairness, transparency, compliance, efficiency and industry reputation in the insurance distribution process,’‘
A master circular issued said the board policy on commission structures for intermediaries should include its objectives and principles, fairness and reasonableness, good distribution practice, and regular review.