As the Insurance Laws (Amendment) Ordinance has omitted Section 40A of the earlier Insurance Act, which talks about commission to insurance agents, the Insurance Regulatory and Development Authority of India (Irda) is working on a revised commission structure.
Under Section 40A of the earlier Act, no insurance agent would get a commission exceeding seven and a half per cent of the first year’s premium, and two per cent of each renewal premium payable on the policy, where the latter grants a deferred annuity in consideration or more than one premium.
As per the traditional product guidelines in force since January 1, 2014, commissions are linked to the tenure of a policy that means the higher the duration, the higher is the commission.
Irda has said commission rates for policies with longer tenure would be higher than those for short-term policies. For policies with tenures of at least 12 years, the commissions would be 35 per cent of the premium.