IRDAI proposes to ban insurance companies from giving incentives and junkets to bank staff for selling insurance policies. The objective is to curb mis-selling of insurance by banks.
The insurance regulator will devise different commission structures for insurance agencies and banks, with incentives to be cut for banks selling insurance, reported The Economic Times citing Mr Nilesh Sathe, an IRDAI member.
"We are going to allow 35% commission and 7% incentives for agency. For banks, we would allow 35% commission but no incentives. The commission is spread over the term depending on the nature and tenor of products."
"We have to compensate agents for their efforts," said Mr Sathe. "An agent approaches several people before he or she is able to sell a policy. In banks, efforts put in are far less.”
However, RM Vishakha, Managing Director of IndiaFirst Life Insurance, said: "Corporate agents incur organisational expenses that are additional to sourcing expenses incurred by individual agents.
"The suggestion of different commissions between corporate agents and individual agents is not comparable considering the unique challenges applicable to each channel.”
RBI watching too
Separately, the central bank, the Reserve Bank of India (RBI), plans to enhance its monitoring of customer service this year with a particular focus on the mis-selling of insurance products.
"We now will examine how banks are faring, and whether further regulations are needed to strengthen consumer protection." RBI Governor Raghuram Rajan said in a forward in the central bank's latest annual report. "In particular, we will focus this year on the issue of mis-selling, especially of insurance products.”