Rakesh Joshi, member (Finance and Investment), IRDAI
Rakesh Joshi, member (Finance and Investment),IRDAI, had met chief financial officers (CFOs) of insurance companies and outlined IRDA’s agenda of laying out a clear cut road map on expenses of management so that costs of the products to fall drastically and the insurance gradually should evolve as a more pull products rather than push products
IRDA is now working out plans to rationalise the whole EoM structure and allow a single limit of 30 per cent EoM under one head rather than dividing it between management expenses and distribution costs.
Mumbai:
In a bid to transform insurance solutions from “push products ” into “pull products”, by bringing in further transparency of product costs and streamlining expenses of management (EoM) for the insurers. the insurance regulator IRDAI will soon announce measures asking them to mention the exact amount of commission, that are being paid to an intermediary for each cover, on the policy documents.
The IRDA is also considering merging the distribution costs with the permissible management costs and allow a single a limit within 30 per cent for insurers.
The idea behind mentioning the commission cost, which is regulated by the IRDAI, on the policy document, will help a customer, both retail and corporate, to be aware of the exact cost of insurance covers and judicious decision making processes.
Earlier, Rakesh Joshi, member (Finance and Investment), IRDAI, had met chief finance officers(CFOs) of life and non-life companies in Mumbai separately last month, to discuss various issues relating to the management expenses.
After patiently hearing the CFOs of some prominent insurance companies for couple of hours, who wanted a higher EoM limit, Joshi outlined IRDA’s agenda saying that the regulator was in favour of laying out a clear cut road map on EoM so that the existing costs of the products to fall significantly and the insurance gradually should be seen as a more pull product rather than push product.
`IRDAI wants insurance penetration to rise and ultimately achieve a fully insured country in a matter two decades. This won’t happen unless costs of covers fall. The Indian mutual fund industry today successfully has made its products a pull product by cutting down its expenses to 0.85 per cent. Now, it is the turn of the insurance industry to replicate this,’’ said Joshi.
Accordingly, the IRDA is now working out plans to rationalise the whole EoM structure and allow a single limit of 30 per cent EoM under one head rather than dividing it between management expenses and distribution costs.
Another interesting fact that was discussed in the IRDA-CFO meeting was that the public sector insurers are spending 75 per cent of their expenses on salaries and remunerations and the rest on distribution including on advertisements while it is other way round for the private sector insurers.
The private sector insurers had pleaded for a higher EOM
After being prodded by the IRDAI, both General insurance Council and Life Insurance Council, the self regulatory organizations(SRO) of general insurance industry and life insurance industry respectively, have formed various committees headed by many CEOs of insurance companies to suggest changes in the existing regulatory framework to promote ease doing business and expand insurance penetration.
The IRDA after receiving all these reports, currently is preparing its agenda to implement a few recommendations put forward by these committees.
Irda is working for the benefit of only 10% of the prospective policyholders. Insurance policy is a complex product for general masses and even for the literate people. So advice of the agents and their recommendations are widely accepted by the people. It’s an imagination to see the so called push product into a pull product. The insurance sector will fall to an unprecedented situation if the vision if the new IRDAI chief are implemented.
If the commission amount is shown on policy, then it would start the downfall of insurance business as customer will push agent to give more discount ( in cash or off record).
The client can’t tolerate if agent is having some good amounts in commission. But, When the agent will not get sufficient income from his services, how he will survive and will be diverted to other works.
Also more than 90 percent customers have need of services of agents, but customers do not want to pay for them directly. So, the hidden commission are better for agents to provide services to clients.
we are giving free services forever to existing customer. also give others free services for which agents have to spend money from their packetd for which one cannot do a valuation of the same. but customers see only commission. Now a days no one gives after- sales services in any field only LIC agents do.
It’s a very bad move or thinking and it should be like axing your own arms.
Since a few days, I am observing all the investment modulators and IRDAI are just after agent commission I feel rather they should give more commissions to agents as the business procurement is the backbone of the Life insurance Corporation(LIC).
On the contrary, what IRDAI should do is to still think a while as it’s agents who are the real time heros who from procurement of business till the maturity give services and in such cases they should stop this so called corporate agency and appoint other mediums (banks) and other bodies to push products.
We need to know one thing life insurance will continue to be a push product and the pull can be done only through the agents So, I will suggest to change the word AGENT to Business Development Managers. Pease note this will increase the face value of agent and the corporation will ALSO get best service providers
Lastly i will also strongly oppose disclosing the agents commission paid on the bond.
If at all, it is mandatory then, make all other expenses of agents in detail which they spend from their pockets like to and fro travelling cost to conduct meetings and to explain the products and along with the ratio of closure of the sales, should be mentioned in the policy bond.
Before implementation of this kind of action IRDAI should be consult with grassroot people of every life insurance companies. It will be very sad news for agents family, if IRDAI will do so.
Sir commission or expenses is not an issue with the policy holder. Issue is government backed insurance company versus private sector insurance company People have more faith in government owned insurance company .That is hindering selling policies of private Insurance companies. Pl clarify to public that both are equally certified by the insurance regulator IRDAI.🙏
I support not to show commission to client.
After some time big agents give commission to clients.
rbmistry.lilapor@gmail.com
Rightly said, Sir.
Why does the IRDAI even want to discuss the agent’s commission in the policy bond.. If that is the case, mention the salaries of the MDs and Staffs as well because ultimately they are getting business through agents. Agents are hardly making any money now-a-days and this move will give a chance to customers to share the commission paid to agents
This is one of the wrong moves,moreover let IRDAI work on some important aspects for penetration rather than mentioning commission which will demotivte agents,and moreover IRDAI employees are taking huge salaries for the work which they are doing, let them put their brains across and develop some formula for insurance penetration.
The idea should be all the agents should be salaried persons. There will be no commission. No GST is required to be paid and service of insurance should be free from GST.
If commission is displayed on policy, then customer will demand from agent that the commission amount be shared with him.
Right, Sir. It’s in no way an IRDAI’role here. Why should anyone know my income except IT?
It is illogical to print the agents commission in the policy bond as rightly said by Nilu where the clients who have not asked for rebate will be induced to do so and ultimately the agent suffers. Instead of focussing on pull and push theory, why the IRDA, which has not hiked commission for agents decades should not increase it? Is the IRDA ready to ban online sales of insurance and increase the agents commission since agents are also affected by the inflation?
Very bad & unnecessary move to be implemented.
You can lower commission on insurance by some extent but it is totally wrong to print pay out on policy bond. Actually if this move is implemented then instead of more penetrations of insurance, it will drastically reduce insurance selling.
My suggestion is that all products/ services should mention profilt / margin on every product / services sold in India.
Just to give an example- for 5 lakh of hospitalization hardly any hospital incrur not more than 20% cost, remaining is their profit.
This is too much. A ridiculous and bad idea. Comparison between MF fund which is Investor’s money and insurance premium which is a consideration for risk assumed is incorrect.
CoA is a variable productwise and CoM as per Insurance Act is fixed expense and is capped.
IRDAI should appoint a committee comprising representatives of Insurers, intermediaries,consumer bodies, legal experts and should be chaired by retired senior judge. Regulator can’t change things what one time Chairman or Member can envisage which are established for decades in India and abroad.
If this is done, market will get spoilt, service will be jeopardised,kick backs will start at retail product levels.
I think regulator has many areas to improve penetration level. Not practical and useful initiative as per my views.
Agree.
The Insurance industry has been surviving in our country primarily because of the excellent services provided by the Intermediaries especially individual agents.
Inorder to reduce the product cost, the IRDA and the Insurance companies first target the agents community which is quite unfortunate. There are so many other expense heads that could be examined for compensating towards designing low cost products. Incorporating the commission rates on the policy document is a writing on the wall that the agents can now start finding out another profession for their survival.
The amount of work involved in Mutual Fund selling is wafer thin when compared to Insurance selling and servicing. Therefore, the comparison is quite unhealthy.
If the “pull product” theory gets implemented by reducing or disclosing agents’ commission to the policy holders, the agents/ intermediaries would, in all probability, look for some other profession which will very badly affect the quantum of business enjoyed by the Insurance companies today.
In case, this unfortunate proposal gets translated into a law, that will, no doubt, indirectly affect further growth prospects of the Insurance Industry as a whole.
Right
It is a contradictory statement because of IRDA rules donot allow disclosing the commission to the customer and on the other hand statement saying that commission value to be mentioned on the policy bond. If it will be implemented than how will the insurance penetration happen and what will be productivity of intermediaries in a service industry?
Very true
Lic staff getting salary due to hard work of agent community
If we stop selling insurance definitely insurance company will collapse
And very rightly said, staff and management salary and expenses should be mentioned.
True. Why in Insurance alone? Then, In all products and services cost of the product (production cost) is to be mentioned instead of MRP
Well said, let MD’s & staffs salaries reflect on the policy copy instead of agents’.
Hi
It’s drastic steps going take by IRDAI to make products pull products by doing this you’re going to destroy Advisor’s life now they are getting some benefits but declare benefits to Advisors then customers will eat that benefits also with bargaining while signing the application.
One thing IRDAI can do remove all Banks from selling the product and give some incentives for people who performing
Insurance is not at all a complex product but has been made into one by misselling practices. Open up the facts and people will buy the required products and ones which actually are useless products will be weeded out.
Sir instead of putting down commission. one should put the salaries of all the branch employees of insurance companies on notice board and keep a daily report of what work they actually do as compared to any insurance agent
Sir, Insurance is not a grocery product. We can get one policy from a family after giving free services for 5 to 10 yrs. So, why you want to display commission cost on policy papers?
Absolutely correct If the implementation commission disclosure on the bond happens then policy holder definitly ask it to return So the chance of survival of agents will be bleak also service cannot be provided to policy holders
The general insurers have made the market dirty by paying any commission they like. But, no action is being taken against them by the IRDAI and we bear the brunt of all these malpractices.
General insurance ki company gandh machaye hai koi kuch pay out de rha hai koi kuch is par koi karyawahi irda nhi kar pa rha hai, uska khamiyaja hm logo ko bhugatna padta hai
Will IRDA and insurance companies mention their salaries , administrative cost, perks etc on the policies which they get at the expense of agents & intermediaries ?
See, by putting the payment of 35% commission on the life insurance bond, from next time no one will renew the policy as the people in India have very cultured mentality. People will start calculating all kinds of things while buying a policy
जीवन बीमा के बांड पर 35% डाल कर एक बार देख ले अगली बार से कोई रिनवेल भी नहीं करेगा, भारत में लोगो की मानसिकता बहुत ही संस्कृण हैं, यहां लोग हिसाब लगाना शुरू कर देंगे.
As such people hate two communities-Insurance Agents and Builders- though both the sections provide essential coverage and home for the buyers only @15% of the basic premium.
Word agent itself sounds dirty and educated people who came in this field as volunteers feel bad about the way they are treated. We came to this field only to help people as we saw them struggling in hospital and with Surveyors who make filthy money at the cost of insured but we feel dejected as the way companies treat the advisors. If commissions are mentioned, then get the advisor empanelment on monthly minimum guarantees salary rolls and add the commission to it as per wish. Don’t make agent a sitting duck in front of the public.
As a General Secretary of All India General Insurance Agents Association, Kolkata District Committee, I would like to inform you that in the most of the operating office, insurance related works are done by agents,but they are always deprived of benefits. But with only 2/3 hours of work done by the employees during a day, they enjoy unlimited facilitie ,which put us much in pain.
Firstly control management cost like reducing their high salaries,PF,Travel,Medical expenses immediately. We are in the market 24 hours and collect maximum 70% premium of total premium income by any insurance company in a year working under this critical situation. If agents’ commission details are mentioned in the policy papers, then it will have a bad impact on the customers.resulting in business loss by insurance companies. All private insurance companies always encourage the marketing forces by paying good commission, incentive etc. as well as motivate regularly.
But the management of four PSUs cannot realise the pain of marketing forces. Due to that reason, day after day they are losing their business.
We have no PF,Gratuity etc. neither any Social Security, but amidst Pandemic situation, agents are collecting premium for their insurance companies and face so many troubles. But during that time, employees are at home and got salary. Now you actually think,what am I saying. Awaiting for your favorable reply.
Very much true, it’s a fact. First of all, people don’t like to invest in insurance products bcoz of long term feature of products; less Returns at the end of the term compared to many products available in market. So, they
think that their money is given to agents throughout their policy term ; how can they digest when they come to know the exact commission received by agents.
Commission shouldn’t be disclosed in Policy Document
100% right, disclosure of commission will lead to a havoc for new agents who are thinking of having a career in insurance business.
It will have bad impact for the LIC Advisor
So please avoid this
Great job by IRDA. At least you guys cannot fool poor people or customers.
Why commission costs should be displayed on the policies? How can it help the policyholders? Rather, it paves the way for many policyholders asking for rebates. Commission is the income of the agents. What business does the public have in knowing Commission structure?
Management expenses are the highest in PSU insurance Cos rather than the distribution cost. Unless this flab is cut,the ideas of Irdai may not work.
The Regulator doesn’t seem to understand the implications of printing the commission amount on the policy document. The policyholders are likely to demand cashback and the intermediary will have no option except to act in violation of Clause 41 (1) of the Insurance Act, 1938 and provide rebates and discounts.
Secondly, as the policies directly purchased online from the insurance company donot carry commission amount, people will not buy from the intermediary unless cashback is provided.
The system, if implemented, will effectively wind up the intermediary model of Insurance distribution and see lakhs of Insurance agents out of job.
Means, no need to afraid of dogs while sitting on an elephant..😏
In fact, it looks that the higher authorities want to reduce the commission of the field staffs/advisors/agents–through whom the common public people got idea and awareness of the insurance industry..
This is not fair. It creates so much and so many problems to agents
IRDAI should expand the distribution channels. Mutual fund should provide a facility to agent to sell all company’s products. It will help customer to choose better product. An agent must be Representative of Customer and not work for insurance company as commission is paid by the customer.
Better to discuss % commission in government jobs & government works
Why only the insurance agent has to suffer, why only his commission should be mentioned, why not the salary of the line manager be mentioned?
This will encourage policy holders to ask for rebates.
This is a good beginning. Agents get peanuts. Development officers, staff and other employees get range of things from sodax coupon to interest free loans. Let everything come in the policy bond bcz all are management expenses
Not Required
Very high level of commission is being paid by the private sector insurers for selling their life insurance policies
One cannot compare insurance products with that of mutual funds as mutual funds don’t require much of the services whereas products like health insurance requires lot of services particularly when it comes to claims.
None of the consumer products mention on the product what is the pay out given to dealer or distributor then why only insurance products.
No change in the payout to advisors but inflations, costs of services to customers have tremendously increased (salaries/running costs/etc)
Why Government of India (GOI) is not reducing the GST (18%) which is one of the major challenges we are facing in distribution of the insurance products.
A professional agent (full time and certified) depends totally on payouts (no salaries) to run the show.
I strongly feel that not by reducing the payout, but taking some of the steps like reduction of GST drastically, creating awareness among customers by various agencies on importance of insurance, strict action against corruption at high levels, reducing travel costs and fringe benefits etc of management, making terms and conditions of various insurance products user friendly, controlling the unnecessary tests ,surgeries at hospital levels(health insurance products) for policy holders, controlling inflation costs, will definitely help customers, .
I strongly oppose the proposal of IRDA.
My request to authority is to relook the issue in totality.
Lke Bankers, Insurers are also dealing with PUBLIC MONEY. Hence as like RBI accountability for CEOs and MD, Directors of any insurance Co registered with IRDA, must be mandated to be brought under CVC.
Recent ICICI Ms Chanda Kochar incident is the immediate example. Like RBI ,IRDA must must also bring accountability to private sector insurers. Once fear of CVO and CVC is there things will be set right automatically. This will create confidence on IRDA among common men. Insurers focus will be on organic growth .When PUBLIC MONEY is dealt, Accountability must be fixed. Auditors can be appointed by IRDA by suitable amendments and IRDA appointed auditors must be involved in the scrutiny of these insurer’s Balance Sheet.
This is a highly Undesirable idea or proposals. General Insurance industry is already going through stiff unhealthy competition and intermediaries are not salaried. Their livelihood as also industry shall be worst affected if amount is mentioned on policy.
The majority of customers will make undue bargain which corporates are already doing despite THE PROHIBITION ON REBATES.
How stupid! how showing commission will help customer?
Instead customers will ask money back on the basis of commission paid to agents or else they will not buy from agent as in todays world also this is going on.
But printing in on bond will make things worse as customer may surrender in cooling of period and it is a headache for agents and insurance company.
All efforts and time by Agent to generate lead, educate customer and close the sales will be wasted.
Agency will be not profitable and agency model will collapse.
Printing on bond will educate more customers about rebate
IRDA should publish all directors’ salaries on their website,
If publishing commission of agent helps customers to take decision on on buying insurance products, then Insurance companies should publish salaries of their chairmen and directors, branch managers and staff.
Which ever company is paying less salary, customers should buy their products..
Why these regulations for insurance industry only?
For example, FMCG goods, if you buy chocolate they don’t need to mention how much retailer gets commission, right.
In the recent past IRDAI has done policies always against insurance agents and agent model which has led to the collapsed all public sector general insurance companies or close or merge to survive.
Next, target is to kill LIC as Agents are main foothold of the corporation..
Private insurers are lobbying with IRDA for such unwanted policy reforms to kill government owned insurance companies.
Then, capture the market through dominance in online sales
Only change will be the same marketing costs, but they will be part of salaries, incentives of marketing staff as efforts to sell policy remain same.
Right now all the pain of selling, marketing and sales costs of policies are absorbed by agents within their commission.
Irda will kill the agents business by this step. Instead work on some model to fix health insurance costs in the country…where stone surgery costs 2 lacs to 4 lacs….doctors and hospital charges a lot. During Covid-19 Pandemic, agents at the costs of his life collect premiums for insurer.
Now by the act of disclosure of commission what are you wanting to prove. clients in India are all miserable, will damage the hard work of 50 years, if insurance agency force is made to reveal the commissions paid to them. Will you publish your salary, take aways, perquisites, etc of staff and managers in public domain then why doing it in case of agents commission which is his bread and butter.
Please work on growing the business and not killing it. rethink and do some good work with government bodies to fix medical costs in hospitals across India. That will save customers from paying increasing premiums . Thanks
Agreed
Very wrong move if if gets implemented …1st of all, it’s wrong to compare mutual fund and insurance product…in mutual fund trail commission is in line with market up and down…whereas in insurance its standard….
After upfront commissions discontinued in mutual funds…the AMCs are suffering for new businesses….
IRDA is on verge of breaking insurance agents backbone….
I guess big bosses should not agree with this motive…
Very bad and disappointing
This is not a good initiative.
It will encourage kick back culture & services/advices will be compromised.
In a country like ours where everyone has access to RTI and other legal remedies at almost no cost, such level of disclosure will affect the lakhs of life & non-life agents income.
Effective way of cost cutting is by curbing soft & hard frauds and cutting down unethical competition amongst insurers.
It is important to put one’s own house in order first.
Insurance is a subject matter of solicitation which appears in every insurance advertisements even by all insurers in India.
This means insurance products are convinced and sold by agents with rigorous efforts. So Insurance not bought by clients on their own.
How disclosure of commission on policy will improve insurance penetration and service after sales?
I do not agree with the proposed move to print commission figure in policy bond.
You tell us what is the benefit of this to us if you will show the commission in the insurance paper. Why should we reveal our private information? This will only harm the agent and not benefit him.
Do you know Mr Joshi , we bring work in winter, summer, rain and not by sitting in AC office.
If you don’t want that we suffer losses, don’t do it or else give begging bowl to all the agents and make them stand on the sidewalk and beg. There is no easier way than this
आप हमें बताएं इससे हमें क्या फायदा है अगर आप बीमा के पेपर में कमीशन शो कर देंगे हम अपना प्राइवेसी क्यों बताये। इससे अभिकर्ता को नुकसान ही होगा न की फायदा होगा। अगर हमारा नुकसान नहीं चाहते इसे न करें या फिर हम सब अभिकर्ताओं को हाथ में कटोरा दे दीजिए और फुटपाथ बैठा दीजिए।
आपको ्क्या मालूम जोशी बाबू हम लोग सर्दी, गर्मी, बरसात में काम कर लाते हैं न की एसी आफिस बैठ कर। आप का तो आफिस एसी,कार एसी,घर एसी क्या मालूम दर्द।
इससे अच्छा तरिका हम बताते हैं हम अभिकर्ताओं के साथ में एक कटोरा दे दीजिए और फुटपाथ पर बैठा कर भीख मांगने पर मजबूर कर दीजिए। इससे आसान रास्ता नहीं है। बाकी आप समझदार है। धन्यवाद
Displaying commission on policy documents is most illogical, stupid decision to made by IRDAI if implemented.
The officials at the helm of IRADAI don’t know the efforts made by Agent to procure business and pains in claim services. Customer when know how much agent is getting as commission naturally expect some cash discount and demand for cashback
This decision is against the welfare and livelihood of Agent.
This must be protested till decision is cancelled.
So many measures could be taken for market penetration and the IRDA focuses on the least efficient of them all. 1. Vehicle inspection can be done away with in case of break in motor insurance. 2. Discounts in all lines of insurance premium can be capped at 50% for all companies. 3. No claim discount can be done away with and Cashless Claim Services can be made mandatory in both motor and health. 4. Commissions can be increased/revised and incentives be given on profitability basis. 5. Cashbacks from agents to customers can be banned. 6. TAT be brought into all suit claims to avoid claim drain. 7. Insurance be made mandatory in all retail market. 8. All PSU insurers and reinsurers be merged into one big Corporation. 9. Downsizing of staff by giving one time VRS. 10. Improving products and portals to work efficiently.