This blog post explains about the new proposal sent to the Insurance Regulator to cut down the existing commissions paid to insurance agents and increase the sum assured for the policy holders. It is just a proposal and it looks Insurance Regulatory & Development Authority (IRDA) is not much interested in the proposal. In this article I will explain about the agents commission structure and why the agents are more important to reach out the customers. Please subscribe to our future articles here.
Commission for Insurance Agents
It is obvious that there should be good income to motivate the agents to get more number of policies. It is true when talking about the insurance agents. They get more commission for their hard work. My humble opinion is they deserve their income because I knew they work hard to get many policy holders. Lets put down few numbers about the commission they are earning to get the policies.
The Insurance Act, 1938, allows insurance companies to pay a maximum commission of 40 per cent of the first year’s premium, 7.5 per cent of the second year’s premium and 5 per cent from there on. The commission paid is limited to 2 per cent in case of single premium policies. In case of pension plans, the commission is limited to 7.5 per cent of the first year’s premium and 2 per cent there on.
As the report points out, for the year from April 1, 2007 to March 31, 2008, the insurance companies paid out a whopping Rs14,704crore as commission.
It is Rs.16.25 for the every Rs.100 . Here the complaint is the high commission for insurance agents leads to low assured value for the policy holder.
Agents deserves the commission
Compare to other countries the awareness and importance of the insurance in India is very low. According to the statistics, more than 90% of the population don’t have the insurance cover for their life. It is not good number for the developing countries like India.
Till now many people are taking the policy because the agents are keen on increasing the convincing the people to take policy which will result in the commission for them. If the IRDA removes the commission, it will be bad day for the insurance sector in India. I hope they could realize the importance of agents.
From the sources, IRDA is in favour of agents, so they will not do anything against the insurance agents. On the other hand, agents must be responsible for providing the correct information to the customers. It is rising number of incidents like cheating the customers and misselling the insurance products which they get more commission. It is very important for the IRDA to regulate and monitor the agents activities. I have explained about the difference between insurance and investments.
In this article I have explained about the importance of insurance agents and their commission structure. If you are one among them, please share your experience as the insurance agent and post your opinion. It will be helpful to the readers. Thank you for reading the article. If you like this article please subscribe to our future articles here.