Hike Agents'
Commission Can Not be Passed on to Policy Holders
Higher Commissions
Should be paid from shareholder's money, not premia, says IRDA Chairman, Mr. T.
S. Vijayan
Currently Annual
Premium is in the Range of Rs. 5,000 to Rs.10,000, there is need for policies
with premium of Rs. 2,000 to Rs. Rs. 3,000
Insurance Regulatory
& Development Authority (IRDA), Chairman, Mr. T. S. Vijayan made a case for
insurance agents' remuneration to be protected.
Speaking at a FICCI
seminar in Mumbai, on Monday, Mr. T.S. Vijayan said that if the cap on agent's
commission is removed, as proposed by the Insurance Bill, then companies will
be free to fix the commission. This means either commissions could rise or /
they could come down.
The Insurance Bill
proposes to remove the cap on agents' commission, which is currently fixed at
40% of first year's premium.
"We can not fix
the minimum wage. The freedom to fix the commission will be given to the
company. There will be a cap on expenses, but not how much to give the agent
& so on. We are going to free everything. If the company wants to give high
commission, let them take shareholder's money. Do not touch policyholder's
money. This is dependent on how the Bill shapes up,'' Mr. Vijayan said.
The Bill proposes a
limit on the management expenses for insurance companies, which will take into
account current premiums in new business, bonus loading, expenses and rate of
interest. But, the higher cost can not be recovered from policyholders by way
of higher premium. The higher commission must be paid from the shareholder's
accounts.
The Chairman Mr. T.S.
Vijayan also urged insurance companies to launch small ticket policies with
smaller premium, in order to improve insurance penetration. While currently
annual premium is in the range of Rs. 5,000 to Rs.10,000, there is need for
policies with premium of Rs. 2,000 to Rs.3000.
"Just as Jan
Dhan Yojana has become a campaign for everyone to have a bank account, a
similar campaign is required for everyone to have insurance,'' he said.
In order to simplify
insurance buying, he also said that there is a need for a central registry for
Know Your Customer norms, which insurance companies can tap into. This will
ensure that if KYC is done once, then there is no need for doing again.
About the proposed
hike in Foreign Direct Investment in insurance to 49%, Mr. T.SVijayan said that
it would help the industry, given the potential for growth. "Nearly 2.5
crore Indians are becoming major every year. They are potential customers. Added
to this, the number of new vehicles coming on the roads every year is also
huge. So, the number of policies that will be sold is phenomenal,'' he said.
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