New Delhi: The government would soon empower the Insurance Regulatory and Development Authority (IRDA) to fix the upper and lower ceilings for brokerage or commission to intermediaries like agents and brokers. This may translate into greater flexibility to the insurance companies in fixing commission of their agents. Presently, ceilings on commission is prescribed in the Insurance Act and it cannot be changed without a lengthy legislative process.
The government would exclude the clause related to determination of commission of insurance agents, brokers and intermediaries from the Insurance Act. IRDA would have the full authority to regulate the commission of agents, which could be changed from time to time without much hassle. Presently, IRDA cannot go beyond what is prescribed in the Insurance Act.
“Presently, Section 40A(1) of the Insurance Act prescribes in detail the manner and quantum of commission payable on life and general policies which inhibits flexibility to the insurers and operates against the overall interest of competition. Hence, it is proposed that the commission should be fixed as per the regulations framed by IRDA,” an official in the finance ministry said. This, he said, would be in the overall interest of the industry.
To achieve this objective, the government is in the process of amending Sections 40(1), 40A(1) and Section 42E of the Act for effecting the changes. IRDA had recently fixed a cap on the commission to insurance agents and brokers, but that was also in accordance with the prescribed norms in the Insurance Act. According to the latest circular by IRDA on commission to insurance agents, overall ceiling was put at 15% for agents and 17.5% for brokers.
The proposed changes would empower IRDA raise or lower the upper limit of 15% in keeping with the prevailing market conditions and industry requirement.
