Insurance Stocks Come Under Pressure Over Proposed Commission Limits, IRDAI Targets Stronger Policy Renewals
New Delhi: Insurance shares fell sharply on Thursday after the Insurance Regulatory and Development Authority of India (IRDAI) proposed commission caps for life insurance policies. Insurance and related stocks declined between 10% and 20%, according to IANS. The draft aims to reduce the emphasis on upfront payouts to sellers and encourage them to help customers continue paying premiums over…
Insurance stocks experienced a significant decline on Thursday following the Insurance Regulatory and Development Authority of India (IRDAI) proposing commission caps for life insurance policies. The draft aims to shift the focus from initial payouts to sellers, encouraging them to assist customers in maintaining premium payments over an extended period.
The proposed limits vary based on the premium payment term (PPT) and the type of entity or agent involved. Policies with shorter PPTs have lower commission caps compared to those with longer PPTs. The proposed caps range from 5% to 25%, covering individual and non-linked life insurance policies. Additionally, the regulator suggested reducing payouts for certain single-premium products and tax incentive policies.
The consultation paper outlines that commission calculations should encompass incentives, awards, reimbursement of selling expenses, and non-cash benefits, integrating these into the proposed limits. The regulator emphasizes that these changes should prioritize continued service over the initial premium payment. The fall in insurance stocks reflects concerns about potential alterations to distribution arrangements.
The proposed commission caps remain subject to consultation, and the existing commission arrangements are not immediately affected.
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