What Is in Store?
Insurance Regulatory and Development Authority (IRDA) is bringing out new guidelines for appointment of insurance agents and capping commissions to insurance agents, including reducing the rates of commissions during the first year of the policy and for its renewals from the second year onwards. The salient features are: salary structure, thereby ensuring that they work on fixed monthly income. that insurance agents’ commission on the first year’s premium is much higher (sometimes @ 25 per cent and above) and tapers off during each renewal year. Now the revised policy will bring them further down so as not to exceed an aggregate of 10 per cent of all first-year premiums and four per cent of all renewal premiums on policies with deferred annuities. payment on any upfront commissions by insurance companies to distributors like banks. IRDA also suggested cancelling the system of advance payments to insurance intermediaries. Insurance companies, which are selling their products through bank branches, will then need to come up with a different model. The proposed IRDA guidelines, if adopted into law, will enable the common man to get premiums at a low cost since insurance companies will not be spending a huge sum of money on commissions. As an investor, it is your responsibility to enquire about all the details of a product before choosing it. If you have been persuaded about an insurance plan by your friendly insurance agent, make sure that the agent has your objective as the paramount factor and nothing else.