Recently, the Insurance Regulatory and Development Authority of India (IRDAI) notified its regulations whereby it abolished the policy segment wise limit on commissions payable to the agents. The commission will now have to be within the insurers’ overall Expenses of Management (EOM).
Going by the new rules, there will be a single expenses of management limit for life insurance, general insurance and standalone health insurance companies as against the segmental and sub-segmental management limits for insurers currently. There is a separate maximum commission limit for health insurance and general insurance companies
Commenting on the same, a senior industry official has said the IRDAI has legalised what was being done in a clandestine manner by the industry players. The official added that the new norms will affect adversely the government owned general insurers and an advantage for mid and large sized private insurers.
“In the case of general insurance companies the Expenses of the Management is freezed at 30 per cent and for stand alone health insurers it is 35 per cent,” the official told news agency IANS.
Earlier, the private players have have been paying their distributors over and above the specified limits and now the regulator has made this legal, according to the official. “No more the insurance companies — life and general insurers — will get notices from the Goods and Services Tax (GST) Authority,” the official noted further.
IANS quoted industry officials as sharing that life and non-life insurers have been paying their product distributors over and above what has been prescribed under various heads.
Meanwhile, the GST Authority has last year alleged 16 insurers of misappropriating a whopping Rs 824 crore of input tax credit using their intermediaries to issue fake invoices. The IRDAI has also penalised several insurers in the past for violating the commission payment norms.
