Financial Daily from THE HINDU group of publications
Wednesday, Mar 27, 2002
Money & Banking - General Insurance
IRDA caps agency commission at 15 pc
NEW DELHI, March 26
THE Insurance Regulatory and Development Authority (IRDA) has said that general insurance companies would be allowed to pay a maximum of 15 per cent as agency commission for insuring assets purchased through individual loans including those under hire-purchase finance or for personal accident cover and sickness.
While stating that the cap should provide enough incentive for the growth of the agency force, the Authority has mentioned that any breach of the commission structure would be dealt with severely by the regulator.
"The Authority would like to caution there exists a system of `on-site inspection' by the Authority for insurers and those found wanting in the implementation of the guidelines and allowing unhealthy practices to creep in will be dealt with as per the provision of the (Insurance) Act,'' the Authority said in a circular issued last week to all general insurance companies.
The circular also clarified that the commission structure that the Authority had specified earlier for business under the tariff regime where the commission payable had been linked to the capital structure of the insured would be applicable only to the cover taken for assets owned by corporates, co-operatives, or firms in the private and public sector.
Thus, the business emanating from individual loans taken from hire purchase companies or banks for purchasing housing property and vehicle would be outside the purview of the caps specified in early March.
The circular issued on March 7 had said that a commission of five per cent would be allowed to be paid by insurers as percentage of premium (applicable only to tariff business) for those insured having a paid-up capital (PUC) of Rs 10 crore.
For the insured with PUC of Rs 10-25 crore, an agency commission of 2.5 per cent has been allowed while no commission was payable for those with PUC above Rs 25 crore.
The commission rates would come into effect from April 1.
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