Sectoral regulator IRDA is expected to
suggest to a high-level panel that the new Insurance Bill remove the existing
40 per cent cap on agency commission and leave agent licensing process to
insurers themselves. Insurance Regulatory and Development Authority (IRDA)
chairman T S Vijayan is slated to meet members of Parliamentary panel on
Insurance Law (Amendment) Bill here on Monday, said a source.
The Bill is likely to be tabled in the winter session. The regulator is
likely to suggest that the agent licensing process, which is currently handled
by IRDA, be handed over to insurers. Currently, after training and examination, the IRDA grants
license to an agent.
Also, the regulator wants the new law to let insurers fix the agency
commission on their own. Currently, the law does not allow an insurer to pay
more than 40 per cent of the first-year premium to the agents as commission.
Sources said the regulator is of the view that a flexible commission
framework will make agents more productive and help deepen insurance
penetration, which is only 3.2 per cent now.
There were 21.5 lakh life
insurance agents at the end of the September quarter. In FY11, there were 26
lakh, which has been steadily declining ever since the commission was capped at
40 per cent. Since the beginning of this fiscal alone, there was a decline of
40,000 agents from 21.9 lakh at the end of the last fiscal.
The decline started after SEBI
banned life insurers from selling unit-linked insurance products in June
2010.
The insurance industry has been
demanding hiking agency fees for long as it would help them organize their
agency force better.
"Agents are responsible
for bringing in over 90 per cent of business to the life insurance industry. But
they do not find their job attractive now with the 40 per cent of first year
premium as their commission," Life Insurance Council secretary general V
Manickam said.
"Hence, the industry has
been demanding that the provisions governing licensing and commission in the
Act must be transferred to IRDA so that the regulator has the flexibility to
allow insurers to fix remuneration to their agents of their own," he
added.
Since an agent can sell
policies of only one company that one is associated with, there is no sense in
not allowing an insurance company to issue license to them, he added.
The source said all the three
IRDA members and few other senior officials will be present during the
interaction with the MP. The meeting is likely to be attended by the house
panel chairman and BJP MP Chandan Mitra. chairman(select committee on insurance amendment
bill 2008
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