Government denies move to stop insurance agents' commission

The government is not going ahead with the Swarup committee proposal that the commission for insurance agents be done away with, the Rajya Sabha was informed today.

In a written reply to the Rajya Sabha, minister of state for finance Namo Narain Meena said "No" to a question whether the government was considering any proposal to discontinue insurance agents' commission.

A government-appointed committee headed by D Swarup had proposed the abolition of selling commissions charged on policyholders, inviting severe criticism by insurance firms, the sector regulator and agents.

The Swarup committee, in its discussion paper had suggested that the insurance product should go "no load" (upfront deduction from premiums paid, all the costs associated with selling an insurance policy) from April 2011 and that there should be minimum common standards for financial advisors and financial education. It has also suggested that in the interim a ceiling be placed on selling commissions embedded in the premiums paid by policyholders - at 15 per cent for the first year (2009-10) and 7 per cent in the next year.

The committee, however, had proposed exemption to term insurance or pure risk cover products. The committee also cited the example of the mutual fund industry that has removed load from 1 August.

The committee has not yet submitted its report to the government.