The Insurance Regulatory and Development Authority of India (IRDAI) has decided to introduce major changes in the regulations pertaining to Expenses of Management (EoM) and Commission limits for the industry. According to sources, its board has approved the removal of product level commission, and put in place a system where overall expenses of an insurer would be monitored.
As a result, the maximum limits for commissions as specified in the current regulations would no longer be possible, with commissions being linked to the overall limit of expense of management. This would enable insurers to devise commission structures, incentivising the intermediaries in line with their solicitation efforts, and also making insurance more affordable.
It has been decided to replace various segmental caps with a single overall limit in general and health insurance. For life insurance, the segmental limits of expenses for certain segments are to be enhanced, with overall regulatory monitoring at the company level. The revisions were aimed at enhancing flexibility and autonomy to the Board of the insurer in the operational and financial decisions.
The regulator is expected to make a formal announcement on the revised guidelines anytime soon.