IRDAI’s new rules on commission payment give more flexibility to insurers to manage their expenses

The move will benefit policyholders: IRDAI announced some important regulatory changes, which is good for policy buyers and the insurance industry, i.e. Revised Expense Management (EOM) and commission cap for the industry. Tapan Singhal, MD & CEO, Bajaj Allianz General Insurance, said, “We strongly believe that the change in cap on company-wide expenses from product level commissions proposed through the proposed regulations, while providing greater flexibility to individual Will ensure uniformity in business model. In managing expenses for insurers. Also, with most insurers above the prescribed norms of expenses and the industry battling a combined ratio of over 118%, these EOM limits will help in bringing cost discipline And will drive the industry in the right direction of prudence and profitability. . So this should translate into better pricing and products for customers in the medium to long term.”

Anil Kumar Agarwal, MD & CEO, Shriram General Insurance, echoed the sentiments of the industry, “The removal of the cap on commission payment will have a positive impact on the insurance sector. It will facilitate greater product innovation, development of new product delivery models and more Will lead to customer-centric operations. It will also increase insurance penetration and provide flexibility to insurers in managing their expenses. Overall, it will smoothen compliance norms.”

The move will benefit distribution-based business model: The amended rules will provide additional expenditure allowance for insurtech’s expenses, expenses on insurance awareness and government’s rural and social schemes etc. Abhishek Bondia, Chief Officer and Managing Director, SecureNow.in said, “This is a positive step for the industry and boosts insurance penetration. Distribution-based business models can attract more investments. Commercial insurance for businesses and will be more able to encourage access to priority areas such as tier-2 cities.

As per the IRDAI notification, the objective of these regulations is to enhance the responsiveness of the regulator to market innovation. Facilitating insurers in developing new business models, products, strategies, internal processes and enabling easy compliance with regulations while meeting regulatory objectives. and To provide flexibility to insurers to manage their expenses with the objective of improving insurance penetration based on their growth aspirations and ever-changing insurance needs.

However, clarity is still awaited on the total allowable expenses of the management including commission and operating cost for the insurer. Mayank Gupta, co-founder and COO of Zopper, said, “The authorities are clearly moving the system towards a more transparent environment and encouraging flexibility. With only the top limits being defined, the market is open to more vigorous negotiations.” and encourage the best deals to surface. Customers will certainly have a more robust, well-designed, cost-effective product offering by stable organizations that they can rely on in the long run Are.”

NS Kannan, Managing Director & CEO, ICICI Prudential Life Insurance, said, “The increased flexibility in commission limits will enable insurers to respond faster to market forces, thereby supporting IRDAI’s vision of improving insurance access in the country.” Management expenses, while limiting expenses in the initial years, have increased the acceptability of the policy in later years. This will persuade insurers to work to improve long-term persistence, which in turn will improve customer proposition. At the same time, it will also improve the profitability of the company.