Intermediaries with high commissions may see payouts drop

NEW INSURANCE AMENDMENT BILL

- AATHIRA VARIER

Insurance intermediaries who receive disproportionately high commissions are likely to see a decline in their payouts, post the new Insurance Amendment Bill. The new Bill gives the Insurance Regulatory & Development Authority of India (Irdai) the power to disgorge unlawful gains made by insurers and intermediaries as well as the right to limit commissions paid to intermediaries.

However, use of the provision will depend on how regulations are formed, industry experts said.

Intermediaries include bancassurance partners, original equipment manufacturers (OEM)-linked partnerships, or similar high-volume channels.

Higher commissions sometimes compromise the welfare of the policyholder and companies may cut corners around claims. If the commissions run overboard, the Bill gives the regulator power to rein in the rates.

However, it has to be seen how the regulations are formed around the same, industry sources said.

Experts also pointed out that there are certain distribution arrangements that are driven by disproportionately high payouts, even when the claims performance and persistency indicators do not justify such structures.