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Insurance products will be expensive! Agents will earn bumper, know what are the new rules of IRDAI and when will they be applicable?

highlights

IRDAI has come out with a revised exposure draft on management expenses for non-life insurance companies.
EOM includes operational expenses of insurance companies, commission of insurance agents etc.
IRDAI has proposed to remove the cap on payment of commission to insurance agents and intermediaries.

New Delhi. Insurance products are expected to become expensive in the coming days. Because the insurance regulatory body IRDAI has come out with a revised exposure draft on management expenses (EoM) for non-life insurance companies. Under this, a revised 30% and 35% cap on EoM has been proposed in the case of general insurance and standalone health insurance companies respectively. The Insurance Regulatory and Development Authority of India (Irdai) has also proposed to remove the cap on payment of commission to insurance agents and intermediaries.

Earlier, in the Exposure Draft issued on August 23, it was proposed to impose a lower limit of 20% on the commission paid to agents and intermediaries of non-life and life insurance companies. At the same time, a 30% cap on EOM was proposed for general insurance companies in the exposure draft.

IRDAI issued guidelines
IRDAI has issued guidelines to streamline Expenses on Management (EoM) for insurance companies. Now India has proposed a cap on EOM to the extent of 30% for general insurance companies and 35% for standalone health insurance companies.

EOM includes operational expenses of insurance companies, commission to insurance agents and intermediaries and commission on reinsurance etc. EOM is currently in the range of 20% to 37.5% for non-life insurance companies.

Experts expressed their views on these new proposals of IRDAI. Sweety Manoj Jain of SM Financial Advisor said that there is a lack of awareness about insurance in the country and agents are an important link to reach customers in this area. In such a situation, the higher commission received by the agents and brokers will motivate them to sell more and more insurance policies and this will give the benefit of insurance protection to the larger population.

At the same time, Sweety Manoj Jain told that insurance companies can get relief from the new proposal of capping in management expenses and they can give partial relief in insurance premium in future.

New rules will be applicable from 1 April 2023
On Wednesday, the regulator issued revised exposure drafts of EOMs for both non-life and life insurers after consultation with stakeholders. At the same time, the regulator also issued a revised exposure draft on payment of commission.

The new rules are expected to come into effect from April 1, 2023, and will remain in force for a period of three years thereafter. IRDAI said, various regulatory reforms initiated/ taken up by the regulator are aimed at increasing insurance penetration and facilitating the ever-increasing growth of the industry, efforts are made to ensure that all the stakeholders and in particular the policyholders Various measures were taken to keep the interests in mind.

Tags: Insurance, Insurance Policy, Insurance Regulatory and Development Authority

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