IRDAI Chief Rules Out Glide Path Sought by Brokers on Commission Caps
IRDAI: The regulator is sticking to its commission-cap approach while considering blended models that could give insurers and intermediaries greater flexibility.
IRDAI chief rules out a phased glide path for proposed commission caps but signals openness to blended commission structures.
New Delhi, IRDAI: Insurance regulator IRDAI has ruled out a gradual glide path for commission caps sought by brokers, while remaining open to blended commissions and outcome-linked remuneration. According to IRDAI Chief Ajay Seth, the regulator is instead looking to calibrate commissions to the effort involved in selling and servicing insurance, with the proposed framework taking into account the product, distribution channel and complexity of the policy.
“We are not banning commissions, as some countries did; we are calibrating them to effort,” Seth said.
The framework could also allow relatively higher limits for agents operating in closed-architecture models, while additional commission is proposed for distribution in smaller towns and rural areas.
Seth said IRDAI is also open to blended commissions, where remuneration within the prescribed limits could be linked to factors such as persistency, servicing, suitability and the absence of mis-selling. However, he said a reliable measurement system would be required before outcome-linked remuneration can become more granular.
This is where the proposed Public Insurance Registry (PIR) is expected to play a key role. The registry is intended to capture data on sales quality, renewals, persistency, surrenders, complaints and mis-selling at the sales-personnel level.
Seth said the broader objective is to move the insurance market away from a system where products are primarily “push sold” towards one where customers can make informed choices.
The PIR, along with market infrastructure such as Bima Sugam, is expected to make insurance products easier to discover, compare and purchase. “The ultimate yardstick is whether the ordinary policyholder gets better value,” Seth said.
The proposed commission framework is part of IRDAI’s wider effort to address mis-selling, high distribution costs and weak persistency while maintaining the commercial viability of insurers and distributors. The regulator has invited stakeholder feedback before finalising the rules.
