Page 52 - Insurance Times May 2023

policyholders for the additional expenses separately, there and long-term traditional endowment policies, despite the
will not be a direct impact on the cost to policyholders. fact that higher mortality charges associated with older age
However, insurance companies may indirectly pass on the groups can significantly reduce potential returns and
cost of agent/broker commissions to policyholders through ultimately impact the final pay-out. This highlights the need
increased premiums in the future. This means that for effective regulation and oversight by the IRDAI to ensure
customers may end up paying more for their insurance that insurance agents act ethically and in the best interests
policies due to higher expenses incurred by the insurance of their customers.
company.
Furthermore, the purpose of imposing limitations on
The regulator and insurers believe that increasing the commission and management expenses in the insurance
commission paid to insurance agents and brokers can help industry is to ensure that insurance companies prioritise
in increasing insurance penetration in the country as the their primary responsibility of managing policyholders' funds
agents will be motivated to sell more policies in order to effectively and efficiently without incurring high expenses.
earn a higher commission. The IRDAI is the regulatory body responsible for overseeing
the insurance industry in India and ensuring that companies
However, there is a potential downside to this approach. If comply with these regulations.
agents and brokers are too focused on earning a higher
commission, they may resort to unethical practices such as However, these new regulations suggest that the IRDAI is
mis-selling policies to customers. Mis-selling can involve playing a more developmental role rather than that of a
persuading customers to purchase policies that are not regulator by actively working on increasing insurance
suitable for their needs or providing misleading information penetration across the country. This could be a concern if
about the terms and conditions of a policy. The life insurance the regulator prioritises the interests of the insurance
sector has a lengthy record of grievances relating to agents industry over those of consumers or the general public,
and bank relationship managers promoting unsuitable which could lead to a situation where the insurance industry
insurance products to individuals. For instance, senior is developing but without actually benefiting the people it
citizens are often sold Unit Linked Insurance Policies (ULIPs) is meant to serve. (Source: PersonalFN)

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The Insurance Times May 2023 47