The Insurance Regulatory and Development Authority of India (IRDAI) is likely to discuss key reforms with respect to commission payouts, expenses of management (EoM), bancassurance tie-ups and capital limits at its next board meeting on November 25, said sources.
IRDAI’s Insurance Advisory Council has submitted 10-11 long-standing reforms to the regulator, which are likely to be taken up at the meeting. These include relaxation in EoM limits, increase in the maximum rate of renewal commission and introduction of discounts in premium for directly sourced policies, sources said.
“Relaxation of EoM limits will benefit the entire industry. It will benefit the bigger players more because they have a larger renewal book and there is likely to be a little more weightage given to the renewal book,” said Vighnesh Shahane, MD and CEO, Ageas Federal Life Insurance.
Currently, there is no flexibility for insurers that have expenses of management lower than 100 per cent. If approved, this modification could give more headroom to such insurers to pay higher distributor commissions, said industry players.
Other proposals reportedly include increasing the allowable expense or renewal premium to 17.5 per cent from 15 per cent and making additional allowable expenses available for more capital-intensive verticals such as rural business, government schemes and insurance awareness. IRDAI is also likely to consider increasing the number of insurance tie-ups that a bank can have from the current limit of three each for life, health and general insurance companies.
Reports suggest that the council has proposed a maximum of nine tie-ups each, however, industry participants believe that a total of 27 tie-ups is unlikely to be allowed as most banks currently don’t even utilise the available limits.
IRDAI might also consider regulations with respect to relaxing the capital requirement for micro and regional insurance companies, opening up the insurance sector for investment by PE (private equity) firms and increasing the cap on insurance tie-ups for insurance marketing firms.