IRDAI revises its guidelines on commission on long-term motor insurance

The Insurance Regulatory and Development Authority of India (IRDAI) has revised its guidelines regarding the commission for long-term motor insurance policies. The recent change in policy brings these long-term policies in line with the standard one-year motor insurance policies.

Under the updated regulation, insurers are now permitted to provide commissions within the expense management framework for long-term policies.

Previously, insurers were allowed to offer a commission of up to 17.5% of the premium as the first-year commission for five-year comprehensive motor insurance policies covering two-wheelers, a CafeMutual Fund report said. Subsequently, the commission was adjusted to 10% for the second and third years, and further reduced to 5% for the fourth and fifth years.

For three-year comprehensive motor insurance policies for four-wheelers, the commission cap was originally set at 15% for the first year, 10% for the second year, and 5% for the third year.

The recent guidelines have granted insurers the freedom to tailor commission structures according to their management expenses.

Last month, IRDAI issued a new master circular on general insurance, which would cover motor, home and travel plans, to encourage products tailored to the individual needs of customers.

The master circular directed insurance companies to ensure greater flexibility to choose products, wider choice of add-ons, concise customer information sheet to provide quick access to key policy clauses and features and tighter turnaround time for appointment of surveyors. 

For insurers “the shift from rule based to principle-based regulatory framework” is aimed at facilitating ease of doing business, promoting innovation and enabling reduction in response time for emerging market needs, it said.

On measures aimed at simplifying the claim settlement process, IRDAI said insurers ought to call for the required documents at the time of underwriting the proposal and should reject no claim for want of documents. “The customer may be asked to submit only those documents necessary and related to claim settlement (if cashless is not available),” it said.