The Hindu : IRDA to vet pay structure of agents, brokers

Online edition of India's National Newspaper
Wednesday, Sep 03, 2003

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Business

IRDA to vet pay structure of agents, brokers

By Our Special Correspondent

CHENNAI SEPT. 2. The Insurance Regulatory and Development Authority of India (IRDA) has constituted an expert committee to look into the remuneration system for brokers and agents in general insurance business. The committee will be headed by A. C. Mukherjee and will have K. N. Bhandari and G. V. Rao as members.

It has been asked specifically to make its recommendations on whether the 5 per cent discount in lieu of the agency commission and remuneration currently enjoyed by a section of the policy-holders should be continued or not. It is also asked to examine if the discount could be modified in any other format, keeping in mind the interest of the growth of the insurance market in India. The committee has also been told to see if any special dispensation is needed for government, corporate and PSE (public sector enterprise) clients.

Significantly enough, the committee has also been advised to inquire if the commission/remuneration paid encourages rebate. If so, it is asked to identify the effect of such rebate on business development and procurement cost as compared to the services rendered by intermediaries.

The committee has been told to submit its recommendations on all these by October 31.

The IRDA has asked the committee to examine the role of intermediaries such as agents and brokers in the emerging context and come out with appropriate recommendations. The committee has been give time till December 31 to make its recommendations on all these aspects.

The issue of discount has been a subject matter of intense debate within and outside the industry. The IRDA had earlier withdrawn the discount available to all classes of business to no-public sector enterprises. It had also stopped brokerage or commission payment in respect of business coming from the PSEs. The IRDA, however, had to allow these bowing to intense pressure from varied sections. The IRDA now is convinced that these issues need to be looked into from a wider canvas and, hence, constituted an expert committee.

Former Chairman of IRDA, N. Rangachary, before vacating his office, issued a notification making it mandatory for insurers to route their business through brokers and debarred special discounts to clients directly. A strong protest from insurance companies resulted in the withdrawal of notification, much to the discomfort of brokers, who have invested heavily into their business after obtaining licence. In fact, IRDA Chairman C. S. Rao had hinted to the brokers that the whole issue would be examined afresh. The expert panel is a sequel to this assurance by Mr. Rao.

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