Kathmandu. In India, there are concerns that the proposed commission limit will reduce the income of insurance brokers.
The Insurance Brokers Association of India has said that if the proposed commission limit is implemented, the income of insurance brokers will decrease by 60-70 percent. The association has also warned that the livelihood of at least 10 lakh people could be at risk in the next five years.
On September 23, India’s insurance regulator IRDAI issued a proposal to reduce commissions and insurance sales costs. After receiving more than 650 suggestions, the deadline has been extended from October 25 to October 31. The new rules have not yet been finalized. Insurance brokers help customers select and purchase insurance from different companies. In return, they receive a commission from the insurance company.
In 2023, India removed the commission limit on various insurance products. Instead, a cap was placed on the total operating expenses of the companies. This was to give companies more flexibility in spending. However, according to the regulator, the commission increase did not provide the expected increase in customer benefits and insurance coverage.
According to the insurance regulator, the fiscal year 2022. 23 and 2024. Between 2025, the premium from new policies (which is a major part of the income of corporate life insurance agents) has increased by 28 percent. While payments with commissions have increased by 125 percent. Corporate agents sell policies on behalf of banks or other institutions on behalf of insurance companies.
In the same period, the premium collected by brokers on non-life insurance has increased by 37 per cent but the commission has increased by 173 per cent. The average commission of brokers in this sector has also increased from 8.5 per cent to 17 per cent.
According to the regulator, this increase in commission is due to the bargaining power of large vendors and additional incentives. According to the new proposal, the first-year commission for certain types of life insurance policies will be limited to 5-20 percent for sales entities like brokers and 6.25-25 percent for direct agents. This rate will depend on the type of insurance and the premium payment period (number of years the premium is paid).
In the new personal health insurance policy, the commission for sales agencies like brokers will be a maximum of 15 percent and 5 percent for policy renewal. Similarly, the commission for direct agents has been proposed to be 20 percent and 10 percent, respectively. – Agencies
