IRDAI Chairman TS Vijayan is urging insurers to offer cost-effective insurance policies to customers rather than focus on incentivising insurance agents with commissions and increasing profitability.
Speaking at at the annual insurance summit organised by the Confederation of Indian Industry (CII), he hinted at an imminent cap on insurers’ expense ratio, a move that may force insurance firms to reduce the commission paid to agents, offer customers more affordable products and curb misselling, reported LiveMint.
“The cost has to come down,” he said.
“We have an insurance information bureau which analyses various ratios and provides bigger data about the industry. I really want insurers to use the analytics of this bureau. There may be a time when IRDAI may put some kind of cap on the expenses of management. It may not happen immediately, but eventually it may happen. So, insurers have to start working on cost-effectiveness now,” he added.
High expense ratios have been a longstanding concern in the insurance industry.
Expenses include advertising, employee wages and commissions for the sales force and are associated with acquiring, underwriting and servicing insurance policies.