Kathmandu: The life insurance companies are found involved in the unnecessary promotion of the single premium insurance policy. Market informers claim that life insurers are providing above the limit of commission and incentives against the single premium income.
As per the directives of the Insurance Board, only 6 percent commission and incentive is payable to the agency members against single premium policy. But such rule has been widely violated by most of the life insurers to secure more first premium income despite having huge financial burden of incentives.
According to the financial statements guidelines, a single premium policy cannot be counted as the first premium. As the insurance fee is paid only once, there is no renewal insurance fee. Due to which, the IBs officials have argued that incentives should not be given to agents on the basis of such policies. However, it has been found that the single premium income under an agency is also included in the calculation of insurance premium.
According to officials, such practices of the companies have resulted excess burden of more than Rs. 4 billion against single premium income. As a major chunk of the insurance premium is taken away by the agency members as commissions and incentives, the life insurance companies cannot offer handsome bonus against such products.
The surrender period was extended to three years after it was found that there was excessive sales in the single premium policy. The process of fulfilling the target by using this policy as a weapon has not been stopped even though the sales have been reduced by extending the surrender value period.
Agents are generally paid a total of 18 percent commission and incentives of first premium income(FPI). Experts say that even if 18 percent commission is to be paid against a single premium, the calculation method of the commission itself should be changed. The commission can be calculated by dividing the insurance premium by the insurance term for such premium income.
