IRDAI issues Commission Payment regulations for Insurers: Learn all about it

As per the specific sections of the Insurance Act of 1938 as well as the Insurance Regulatory and Development Authority Act of 1999, the IRDA Authority, in consultation with the Insurance Advisory Committee, released these regulations in its official gazette. They are termed as the Insurance Regulatory and Development Authority of India Payment of Commission Regulations of 2023. The stated regulations will come into force from April 1, 2023. Such regulations are susceptible to reviewing and updating procedures once every three years from the date of notification. The IRDA can also warrant the review, repeal, and amendment earlier.

Purpose of issuing Payment of Commission Regulations 2023

The IRDAI has concentrated on the objectives of Payment of Commission Regulations in the following pointers:

• To enhance responsiveness leading to market innovation in the Insurance Sector
• To facilitate existing Insurers in developing new models, products, strategies, & internal processes for their Business Conduct
• To enable easy compliance filing as per the regulatory objectives with IRDAI
• To provide Insurers flexibility to manage their expenses based on their Business’s growth
• To cope with the ever-changing insurance needs of the consumers as well as market forces to further insurance penetration among the rural as well as general masses

Here, the term Commission includes compensation such as remuneration or a reward paid by an Insurance Company to its appointed ISP, Insurance Agent, or Insurance Intermediary for procuring or transacting the insurance business.

Read more about : Functions of IRDA in Insurance Sector

What must be the Insurance Company’s Board-Approved Policy for Commission Payments?

The following are the general guidelines issued under the Payment for Commission regulations for generating a Board Approved Policy for the Intermediary Business:

1. Every Insurer must maintain a written policy for Payment of Commission approved by its Board Members, which are majorly Insurers
2. The Company must periodically review its Board Policy
3. The Board must take the policy objectives for Payment of Commission take into consideration for the following cases:

• In the interest of the policyholders
• To further Insurance Penetration 
• To further Insurance Density 
• As per the nature  as well as the tenure of the Insurance Policy
• As per the interest of the following entities:
  • Insurance Agent
  • Intermediaries
  • Insurance intermediary
• To strengthen the Insurance Agent’s performance or its Insurance intermediary;
• To commensurate with an effective business strategy
• To become cost-effective in the conduct of Business 
• To simplify the administration of Insurance Businesses
• To indicate the relative degree of importance placed on the aforementioned

Commission payable to Agents and Intermediaries by Insurers

The Insurer must not exceed the total amount of payable Commission for Life Insurance products. It can also include health insurance products offered by Life Insurers. The exceeding limit is set at the Expense of Management or EOM. This EOM limit is specified under the IRDAI 

Expenses of Management of Insurers transacting Life insurance business Regulations of 2023

For General Insurance products, the amount payable to Commission, including health insurance products by General Insurers and Standalone Health Insurers, must not exceed the EOM limits. The limit is specified under the IRDAI 

Expenses of Management of Insurers transacting General or Health Insurance Business Regulations of 2023

The Authority can amend each such set of regulations from time to time. (How To Become a Health Insurance Broker ?)

Submission of Returns on Payment of Commission by the Insurer

All Insurers are obligated to submit the Board Approved returns on Payment of Commission to the Insurance Agent or the Insurance Intermediary within 45 days of the financial year closure. Here, the IRDAI must specify the formats for the requisite information submission from time to time, as well as review these returns before being placed for Insurer’s Board Approval.

Repealing the earlier Payment Directives

The IRDAI will repeal the Payment of Commission/Remuneration/Reward to Insurance Agents as well as the Insurance intermediaries Regulations of 2016 upon the latest regulation implementation.

To remove difficulties in the application of the regulation’s provisions, the Chairperson of the Authority can issue certain clarifications, directions, or guidelines in the near future. To know more about this, connect with the IRDA Registration Experts at Registrationwala. Any legal syntax can be easily translated and conveyed to you in no time.

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Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.