Page 10 - The Insurance Times September 2022

on the limits of expenses for life insur- The same will be available from Decem- surance cover unaffordable to many
ance companies. For life insurance com- ber this year. sections of society, Panda said. "We
panies, the expenditure limit will be in have to look at ways of reducing the
"All products from life, general and
consonance with their policy business. expenses in order to make insurance
standalone health insurers to be listed
This means that there will be a limit on affordable," he said, adding that it
on IRDAI’s proposed platform," they said.
what companies will spend on agents’
should not be too burdensome for in-
commissions, rewards, employee sala- In order to sell policies, agents will have
surers either.
ries and other expenses. to become platform members. They
can sell it from all insurance companies
In pure risk products which are also re-
IRDAI's new rules on com-
once they become members.
ferred to as Term insurance plans, for
missions give cos flexibility
selling a policy for the first year, the IRDAI believes that insurance platform
expense limit will now be capped 80 per will help insurance penetration in Tier The insurance regulator's new norms
cent of the overall premium, as per the 2, 3 areas and will also bring down ex- on commissions give insurance compa-
draft. As for renewal premium, the EoM isting commission rates. nies more flexibility while streamlining
(Expense of Management) could be at payments to agents and incentivising
Earlier, sources said that the IRDAI
25 per cent. higher 'persistency ratios'. However,
committee is likely to propose allowing
the focus on maintaining a certain
For life insurance plans which are not life insurers to sell health insurance. The
threshold of expenses could benefit
under the pure risk category, the first committee is likely to seek a nod for the
year expense will be capped 80 per cent distribution and manufacture of health larger players who have a wider busi-
of the overall premium. As for renewal insurance. ness with deeper banking relationships
plans, the EoM will be capped at 17.5 and could also disincentivise small
The committee cited improved pen-
per cent of the overall premium. agents from selling policies, industry
etration, and global practice to support
executives and analysts said.
In annuity plans with single premiums, the move.
the expense allowed will be up to 5 per Persistency ratio shows how many poli-
Presently, life insurers sell only fixed
cent of the total premium, the draft cyholders paid their renewal premium.
benefit health plans and not indemnity
said. For individual pure risk and group
products. As per IRDAI, 75 percent of In a draft notification earlier this week,
policies with a single premium, the
people pay for medical expenses from the Insurance Regulatory and Develop-
maximum expenditure allowed will be
their pockets. ment Authority of India (IRDAI) set a
10 per cent.
20% commission cap for general insur-
The insurance regulator IRDAI has asked IRDAI pitches for afford- ance companies, down from the 30%
the life insurance companies to reduce to 35% they could charge earlier. The
able health cover for ev-
their expenses and pass on the benefits regulator also allowed life insurers
to the customers. It has also made pro- eryone
whose expenses were under 70% of the
visions to stop allowances of the top
Insurance regulator Tuesday made a allowable limit to set their own com-
management of the companies in the
strong case for reducing expenses to mission rates across product segments.
event of a violation of the IRDAI rules
make health insurance affordable for
For companies that are above the ex-
mandating the limit of expenditure.
everyone.
penses threshold, the maximum com-
Addressing the 'Health Insurance Sum- mission allowed as a percentage of pre-
IRDAI proposes setting up
mit 2022' here, Insurance Regulatory mium is between 2% and 20%, down
new platform for sale of and Development Authority of India from a peak of 40% earlier. More im-
insurance policies (Irdai) chairman Debasish Panda said portantly, there is a built-in commission
that high operating and distribution for premium payments in the 5th, 10th,
Insurance Regulatory and Development
costs, and hospital expenses as indirect and 15th years, which encourages
Authority of India (IRDAI) has proposed
costs could be the reasons affecting the higher levels of persistency from
setting up a new platform for sale, ser-
insurance pricing. agents. Stakeholders have time till Sep-
vicing and claims of insurance policies,
sources informed CNBC-TV18. Pricing is probably very high leaving in- tember 14 to give feedback.
10 The Insurance Times, September 2022