Stories
IRDAI Commission Cuts Threaten Insurance Expansion in Smaller Cities: Helios Global CEO
- •Helios Global CEO Swami Saran Sharma warns IRDAI's proposed commission cuts could hinder insurance expansion in Tier 3 and Tier 4 cities.
- •Lower business volumes in smaller towns make agent networks more costly to run, and sharp commission cuts could make expansion unviable.
- •Sharma questions if savings from lower commissions will reach policyholders, urging IRDAI to ensure pass-through rather than absorption by insurers or distributors.
- •While supporting rationalizing commissions for mandatory products like motor insurance, Sharma cautions against uniform cuts for all insurance lines, especially liability insurance with low premium volumes.
- •IRDAI's new Expenses of Management rules aim to curb indirect payouts to agents, potentially leading to unhealthy competition among insurers and distributors.
Key Questions Answered
Helios Global CEO Swami Saran Sharma stated that the biggest impact of the IRDAI's latest distribution proposals would be felt in smaller towns, where insurers trying to expand into Tier 3 and Tier 4 cities rely on agent networks that cost more to run due to lower business volumes, making expansion harder to justify.
Sharma flagged an open question in IRDAI's concept paper regarding whether savings from lower commissions will actually reach policyholders, noting that the paper is silent on this point and that the regulator must ensure these savings are passed through rather than absorbed by insurers or distributors.
Sharma believes rationalizing commissions is positive for legally mandatory products like motor insurance that require low sales effort, but warns that low commissions would not work for liability insurance due to high sales effort and low premium volumes.
