Committee to review remuneration to insurance intermediaries

Chennai: Insurance Regulatory and Development Authority (IRDA) has constituted a three-member committee to examine in depth the remuneration structure of insurance intermediaries (agents and brokers). The committee will be chaired by A C Mukherjee, and K N Bhandari and G V Rao will be the members.

IRDA's decision to restore the facility of 5-per cent premium discount in lieu of agency/broker commission has upset the broking community.

On the other hand the authority's May notification scrapping the discount facility has affected the corporates and the four government-owned general insurers as it resulted in an increased premium outgo for the former and a higher cost of operations for the latter. The insurers had to pay a brokerage of 17.5 per cent on the premium procured through brokers.

The regulator received representations from different stakeholders (insurers, policyholders, field staff of insurers, chambers of commerce and members of parliament) against withdrawing the premium discount and also the payment of commission in respect to business generated from public sector undertakings (PSU).

What really impacted the public sector companies enjoying good credit ratings are the market place malpractices indulged by broking firms like rebating — inducements to corporate executives to buy insurance covers through them.