Hydearbad:
Finding fault with the existing systems followed by the insurers for paying of commission or remuneration or rewards to the intermediaries, the insurance regulator IRDAI on Friday has revamped the existing norms for its meaningful and effective compliance uniformly by all insurers from FY 2020-21 onwards..
Though the existing norms states that the reward has to paid based on an objective and transparent criteria approved by the board of the insurance companies, it is observed that the board approved policy of many insurers lacks objectivity and transparency, said the circular signed by TR Alamelu,member(Non-life)IRDAI.
In certain instances the board approved policy allowed delegation of power to the CEO or other authorised person to decide on the rewards to be given to insurance agents and insurance intermediaries,observed IRDAI.
Further, there appears minimal oversight by the board to determine the efficacy of such policy and it is noticed in many instances that the quantum of reward paid to insurance agents and intermediaries exceeds the commission and remuneration paid to them.
The IRDAI has emphasised that the board approved policies should contain the objective and transparent criteria including the parameters on which the rewards are calculated along with the necessary justification and logic,
The board approved policy should stipulate the specific proportion of rewards to commission/remuneration which sholud be reasonable and justifiable, to individual insurance agent/insurance intermediary subject to the overall limit as specified in the existing regulations-Reg 6(d)(ii) and 6(e)(ii) of IRDAI (Payment of commission or remuneration or reward to insurance agents and insurance intermediaries) Regulations, 2016.
There should be consistency in the approach to rewards payable to insurance agents and insurance intermediaries for similar businesses and situations.
The board should have effective oversight of the implementation of the reward policy.
The insurers has to communicate in writing at the beginning of the year to insurance agents and insurance intermediaries about the maximum rewards that they can earn during the year subject to fulfilment of stipulated criteria of board policy and keeping in view the laid down proportion of rewards to commission / remuneration.
Further, if any addition/changes/deletion in the reward program is undertaken by the insurer, the same also be communicated to insurance agents & intermediaries in advance.