Page 12 - Insurance Times May 2023

Agency Commission cap ings to customers, which is potentially
IRDAI designates LIC,
set to bring down policy costs. This was
removal to aid PSU banks
mentioned in its latest guidelines, re- GIC Re, and New India
The insurance regulator's decision to leased. It further requested insurance
as DSIIs
free commissions will benefit public sec- firms to chart out clear plans for reduc-
IRDAI announced that Life Insur-
tor banks (PSBs) as they have received ing their expenses and transferring gains
ance Corporation of India, General
lower fees than other intermediaries for via lower premiums for policyholders.
Insurance Corporation of India, and
selling policies.
IRDAI is looking for a 'well-documented New India Assurance Co are still con-
Recently, IRDAI replaced its prescribed policy', which must be approved by each sidered Domestic Systemically Im-
commission cap with a board-approved insurer's board annually. It will then be portant Insurers (D-SIIs) and noted
commission policy subject to an overall that they are viewed as being "too
implemented, subject to the total Ex-
cap on their expenses of management. pense of Management (EoM). This is big or too important to fail."
According to industry insiders, although
anticipated to result in better pricing Domestic Systemically Important
the commission cap has existed, com-
and products for customers. At present, Insurers (D-SIIs) is used to describe
panies have been working around the term plans pay 40% of the premium as insurance companies that are cru-
rules to pay higher compensation to cial to the domestic financial sys-
the commission for the first year, while
private distributors under other heads tem due to their size, market sig-
policies by other life insurers offer 15-
of expenditure. nificance, and connections both
35%, on the basis of the premium pay-
within the country and globally. The
Now, there is an overall cap of 30% on ing term.
failure or financial instability of
management expenses for general in-
Tarun Chugh, MD and CEO of Bajaj
these insurers could have a severe
surers and 35% cap for standalone
Allianz Life Insurance Co. Ltd. stated impact on the stability of the do-
health insurers.
that customers will see prices coming mestic financial system.
In the case of private companies, ac- down while the benefits improve. Ac-
The functioning of D-SIIs is vital for the
tual expense of management are much cording to the newest guidelines, EoM uninterrupted availability of insurance
lower because of higher productivity. caps are to be linked with product cat- services to the national economy.
egories.
"LIC, GIC Re., and New India con-
IRDAI asks insurers to cut For example, the EoM ceiling on pure tinue to be identified as Domestic
risk products like premium term insur- Systemically Important Insurers (D-
costs, pass on gains to cus-
ance policies of more than 10 years, will SIIs), as in the 2021-22 list of D-
tomers be 100% of the first year's premium. SIIs," the Insurance Regulatory and
Development Authority of India
IRDAI has moved insurers to cut down However, it will be 25% of the renewal
(Irdai) said while releasing the list
on their expenses and pass on their sav- premiums in the following years. The
of D-SIIs for the year 2022-23.
12 May 2023 The Insurance Times