The Insurance Regulatory and Development Authority has capped the agents’ commission paid by insurers for selling policies with limited premium payment tenure. Irda said commission paid by insurers to agents selling policies with limited paying tenure should be 10-25 per cent of the first-year premium. The regulator specified the rate of renewal commission for such plans, where the premium paying tenure is lower than the policy term. The move is to discourage policies with limited tenure.
According to the Insurance Act, an insurance company less than 10 years old can pay up to 40 per cent of the premium as commission in the first year to an agent on traditional policies. Companies more than 10 years have first-year commission capped at 35 per cent.
In a recent communication to insurers, Irda has specified the first-year commission would be capped at 10 per cent for policies with a tenure between five and nine years. For the remaining term, the maximum commission payout would be capped at five per cent. For policies with a 10-14-year tenures, the maximum commission would be 20 per cent for the first year, 7.5 per cent for the second and third years and five per cent for the remaining term.
For policies with more than 15 yearsÆ tenure, the regulator has suggested insurers offer a commission of 25 per cent for the first year, 7.5 per cent for second and third years, and five per cent thereafter. Earlier, a renewal commission was not specified by the regulator.