IRDAI Issues Warning on Insurance Commission Payouts, Urges Premium Reduction
The Insurance Regulatory and Development Authority of India (IRDAI) has issued a warning to health and general insurance providers regarding escalating commission payouts. These elevated commissions are directly contributing to increased premiums for consumers, according to reports from CNBC-TV18.
IRDAI has urged insurance companies to take corrective action to reduce these commissions and subsequently lower premiums. Failure to comply could lead to strict measures, potentially including limits on commission payouts during the next Expenses of Management (EoM) review cycle.
Life and general insurance companies rely on commissions paid to agents, distributor banks, and other intermediaries for soliciting and securing insurance policies. The regulator is concerned that recent increases in commissions are directly impacting policyholders.
In 2023, IRDAI removed limits on commission payments to insurance intermediaries, intending to give insurers greater flexibility in managing their expenses. However, the regulator now believes this change has led to unintended consequences.
IRDAI’s concern has been amplified by recent data. A survey conducted by LocalCircles in February revealed that over two-thirds of health insurance policyholders have experienced a cumulative premium increase of 50-200% over the past three years. Furthermore, the survey showed that 52% of personal health insurance policyholders faced premium increases exceeding 25% in the last year. The survey encompassed over 35,000 responses from citizens across 329 districts in India. The IRDAI is responding to these consumer experiences by demanding a correction to commission structures.
The regulator’s immediate demand is for general and life insurance companies to reduce commission payouts and pass the benefit to customers, thus resolving the elevated premium concerns.
