The Hindu Business Line : Cos, brokers cross swords over `direct biz' discount

In a memorandum submitted by the chamber to Mr C.S. Rao, Chairman, Insurance Regulatory & Development Authority (IRDA), the chamber stated that "market forces should be allowed to have a full play."

Reacting to it, city-based brokers said that this was an unjustified demand and would lead to an unhealthy atmosphere, which in turn would harm the gradual development of the domestic insurance industry.

An insurance broker said: "The corporate houses are free to deal directly with the insurance company but they should not ask for a discount that is given to a broker as a commission. If this is accepted by those in authority, there is simply no need to have brokers in the insurance industry."

Mr Biswadip Gupta, president of the chamber, also expressed concern over the recent IRDA decision to withdraw the 5 per cent discount which the companies used to enjoy for directly giving business to the insurer.

"Our submission is that IRDA should wait till full de-tariffing before making it compulsory for placing business through brokers as it is a common practice in the global insurance market," Mr Gupta said.

The chamber suggested mandatory training of corporate executives dealing with insurance matters and felt that by passing on the discount - the margin meant for the brokers - to the corporate houses, IRDA would give a major boost to these executives.

In response to it, the brokers ask: "Is it the duty of IRDA or the insurer or the insurance industry in general to boost the sagging morale of corporate executives?"

The chamber gave the example of the manufacturing sector where the producer gives discount to the buyers when they approach directly.

The chamber has recommended a new commission structure.

According to it, it should be 20 per cent for new businesses and 15 per cent for renewals and there should not be any linkage of the commission or brokerage with the paid-up capital of the insured entity.