Page 9 - Life Insurance Today May 2016
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commission for Corporate Agents and 20% for the
individual agents.
All these are paid out of the premium paid by the
policyholders.
So in effect, the customers will be paying 42-49% in the
first year on Bundled products. Thus the customer is the
loser.
3. The insurance companies should invest in human Instead of the Regulator encouraging the concept of the
assets- good exposure to employees, timely and Trail Model of Commission- where the commission is
regular training, job rotations, overseas programs- spread over the life time of the product, instead of
these all will lead to less attrition among employees bundled up in the beginning of the term or up-fronted -
& officers. IRDAI is following the old policy of paying high commission
in the first year. The Trail Model will motivate the agents
4. The insurance companies should concentrate on in following up with the customers to continue their
Affinity-based channels as Doctors, CAs, RWAs- policies, instead of lapsing them. Now the agents will not
Resident Welfare Associations- etc to increase their be interested in the renewal commission- instead they may
reach. In USA, there are Associations of Retired resort to ' hit & run' attitude- they will try to grab whatever
People- AARP- Soccer & Rugby clubs. they can get in the first year without caring about the
subsequent commissions. Even the Sumit Bose committee
5. Prompt and transparent grievance redressal systems has recommended the Trail Model of commission.
in each insurance company are needed for restoring
the customers' faith. Even the figures of the IRDAI for the Persistency Ratio for
the year 2013-14 say that only 60% of the policies
6. Just as the insurer wants to have a 360 degree look continue after the 1 year, whereas the Global average is
of the customer, the customer too wants to have a full 90%.
view of the insurer. This comes from the personalized
experiences providing value, improved service quality, At the end of 5 years after taking the policy, the position
individual care, reduction of customer stress, is worse- not even one third of the policies continue.
increased value for money and customer
empowerment. Coming to Term Insurance products, IRDAI has
recommended 50% of the premium as the 1 year
IRDAI on the rate of Commission for commission, if the term is 12 years and more and 10% in
Agents & other Distributors the subsequent years. This has been done in order to
encourage selling of Term Insurance products but again the
IRDAI brought forward the Draft Guidelines for the catch is with the premium being drastically lower for Term
commission for Agents: Insurance plans than the Bundled products, these high
percentages may matter very little.
For Bundled products- ULIPs & Traditional Insurance Plans-
it is 35% for the first year, 7.5% from second year to fifth Instead the Regulator should link commission for the Term
year & 5% there afterwards. This is if the policy term is Insurance plans with the sum assured or coverage, with
12 years and more. the result the average sum assured will improve and
people will go in for High Risk plans. This is amply proved
If the policy term is less than 12 years, the commission is by the online sales of the Term Insurance plans- where Rs
30% for the first year. 2 lacs is the average sum assured through direct selling by
agents of the Term Insurance plans, Rs 70 lacs- Rs 1 crore
Besides the above, the insurer can earmark rewards or
incentives directly or indirectly up to 40% of the 1 year
Life Insurance Today May 2016 9
