Insurers cut agent commissions to offset input credit losses

Distributors, agents claim pvt insurance companies are slashing their fees by up to 18%

- BENN KOCHUVEEDAN @Mumbai

FOLLOWING the complete removal of 18% GST on individual life, health and accident cover insurance policies, some leading private insurers are slashing the agent commission by 18% to pass on the entire tax benefits to customers.

The move has been questioned by the distributors, whose commissions represent 15-20% of the Rs 40,000-50,000 crore retail insurance market.

The real reason for reducing agency commission is to help partly offset the loss from the nonavailability of input tax credit (ITC). When the government was charging 18% GST on insurance, insurance companies were eligible for input tax credit, but with no tax on insurance policies they are not eligible for the same as the unique feature of ITC is that unless you charge tax from end customers, you cannot claim this form of tax in the range of 2.2-2.7%.