This story is from December 17, 2007

Insurers under fire over commission

Arti Sharma / TNN / Dec 17, 2007, 00:01 IST

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At a General Insurance Council meeting, insurers have been warned against violating regulations and exceeding payouts to brokers and agents while procuring business.

MUMBAI: At a General Insurance Council meeting last week, insurers have been warned against violating regulations and exceeding payouts to brokers and agents while procuring business. General insurance companies, both private and public, have been found to exceed the amounts of brokerage and commission paid to intermediaries by at least 10%.
It is understood that after several reports against firms emerged regarding such violations, the regulator and the council members have asked the general insurers to withdraw any excesses and have warned them of dire consequences if they fail to comply.
"This is a serious matter because these payments brokerages and commissions are ultimately part of the premium paid by the customer. If a company is paying more to the intermediaries it is overcharging the customer. The regulator wants the benefit of competitive pricing to pass on to the consumer not at the cost of the consumer," GIC secretary general, K N Bhandari told TOI.
As per the Insurance Act 1938, general insurance are not allowed to pay a commission or remuneration to special agents above 15% of the premium payable on fire, marine or miscellaneous insurance (includes health).

As per the IRDA notification of 2002, insurance brokers are allowed within 10% of the premium on the part of the business that is compulsory by law on tariff products while they are allowed up to 12.5% of the premium on others. On non-tariff products, brokers are allowed an amount not exceeding 17.5% of the premium on direct business.
The issue was raised recently at the council level when reports of such violations started coming in from clients, brokers and even companies themselves.
Bhandari added that if companies were found to be non-compliant then the regulator would take up the matter seriously and firms could even face the possibility of losing their licence depending on how serious the violation was. He said that the council would continue to keep an ear to the ground to monitor the situation in the future.

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