IRDAI removes the upper cap on commission for insurance agents

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  • By Taxmann
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  • Last Updated on 31 March, 2023

IRDAI; insurance agent

Notification F.No. IRDAI/Reg./3/191/2023, dated 26.03.2023

The IRDAI has notified the IRDAI (Expenses of Management of Insurers transacting life insurance business) Regulations, 2023 to provide flexibility to insurers to manage their expenses within overall limits. The IRDAI has removed the cap on commission payments to insurance agents & replaced it with an overall cap on the expenses of management.

Now, no insurer shall spend an amount on management expenses that exceed the amount of commission paid for the business transacted in the financial year.

Further, no insurer carrying life insurance business shall spend as expenses of management in any financial year an amount exceeding the aggregate sum as may be prescribed. Some of such limits include:

(a) 5% of all single premiums received during the year on policies granting:

    • An immediate annuity; or
    • A deferred annuity;

(b) 5% of all premiums received on other single premium policies during the year excluding:

    • Group Fund based policies;
    • Individual Pure Risk policies;
    • Group Pure Risk policies; and

(c) 10% of all single premiums received during the year on group pure risk policies;

(d) 14% of all single premiums received during the year on individual pure risk policies;

(e) 15% of all premiums received on one-year renewable group policies, other than group fund-based policies.

Also, in addition to the expenses limits as prescribed, the insurer shall be allowed the following additional expenses:

(a) Head Office Expenses.

(b) Expenses incurred towards Rural sector, Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) business or such other schemes as notified by the Authority.

(c) Expenses incurred towards the Insurtech and Insurance Awareness to the extent of 5% of allowable expenses of management.

Further, all insurers transacting Life insurance business shall prepare with reference to that year a Return of Expenses of Management as per the format specified. The Return shall be signed by the Chief Executive Officer, the Chief Financial Officer, the Chief Compliance Officer and Appointed Actuary of the Insurer. Various other conditions and compliances were also prescribed.

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