The Hindu Business Line : IRDA waives special discount, issues new insurance brokerage norms

THE insurance brokerage companies have got a small relief with the Insurance Regulatory Development Authority (IRDA) issuing fresh guidelines with the removal of 5 per cent special discount for companies with paid up capital up to Rs 3 crore.

The system to be applicable from April 1 will be for a one-year period. In its fresh circular, the IRDA has in fact improved upon the Expert Committee recommendation to waive the special discount in lieu of agency commission/brokers remuneration for companies with paid up capital up to Rs 1 crore.

The IRDA has for the time being partially accepted the report of the Expert Committee which examined the remuneration system for insurance brokers and whose recommendations were put up on the IRDA Web site and feedback obtained.

The Insurance Regulator circular addresses the issues of

special discount in lieu of agency commission/broker's remuneration, and

the structure of agency commission/brokers remuneration in respect of tariff business of fire, petrochemical, engineering, CL(Fire), MLOP, IAR, motor, statutory insurances and non-tariff business.

Except for the marine hull tariff business, the new guidelines will be applicable for a year, the circular said.

The Authority will examine the recommendations made by the Expert Committee on other matters and shall take a final decision in due course of time, according to Mr C.S. Rao, Chairman, IRDA.

Interestingly, a special discount of 5 per cent in lieu of agency commission/ broker's remuneration is now available for companies with a paid up capital above Rs 10 lakh. As the present limit was fixed more than three decades ago, the eligibility limits for special discount now stands raised from Rs 10 lakh to Rs 3 crore without any distinction between public and private sector.

Companies or firms, whether private limited companies or public sector undertakings or statutory bodies having a paid up capital above Rs 3 crore shall henceforth have the option of either:

availing of 5 per cent special discount and place the tariff business of fire, petrochemical, engineering, CL(Fire), MLOP and IAR directly with an insurer; or

seek the services of an insurance broker/ agent when they will become ineligible for the 5 per cent special discount.

Responding to the development, the CEO of Strategic Insurance Services (SIS), a Hyderabad-based insurance brokerage-cum-services provider, Mr A. Murli Mukund said: "The insurance companies can as well reduce the premium instead of offering special discount to the clients directly and limiting the customers choice to seek the professional services of the broker as was prevalent in other parts of the world."

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