Insurance ind welcomes new law freeing agency commission

Insurance industry has welcomed the new law that empowers regulator Irda to fix agency commission, saying this will help arrest the high attrition rate, which has been dogging the sector for many years. Despite high attrition rates--in the first ten months of this fiscal a whopping 5,83,000 agents have left the industry--the agents are the largest sales force for all life insurers. The industry has been blaming this to the low-fee structure, which the previous insurance law had mandated.

There were 21,09,718 agents as of end January 2014 as against 21,89,000 at the beginning of April last. As per the existing system, up to 25 percent of the first year premium is given to the agents as commission in traditional policies. However, this is a low 15 percent in case of money-back policies and other Ulips products.

"The new Insurance Act empowers Irda to finalise the agency commission structure and inform us. Also, it can enact regulations in such a way that commissions become attractive for the agents," V Manickam, secretary general of Life Insurance Council, which is recognized as a self regulatory organization under the new law, told PTI. Private players ICICI Prudential Life gets 30 per cent of its business through its agency force.

"The commission should be product-wise and focus must be on how to establish a synergy between product, distribution and technology as the idea should be on how to increase insurance penetration," a senior company official said. Meanwhile, the Life Insurance Council is gearing up to send monthly report relating to addition and deletion of agents and send the same to Irda and the finance ministry. While 5,03,000 new agents joined the sector since the beginning of this fiscal, as many as 5,83,000 agents have left the industry as of end January, resulting in a net attrition of 80,000 agents during the 10-month period, as per data.