Insurance agents resume work after IB raises capLife insurance agents who had stopped issuing new policies to protest the move by the Insurance Board (IB) to limit their commission have returned to work after it revised the cap on agent incentive and business promotion.
Life insurance agents who had stopped issuing new policies to protest the move by the Insurance Board (IB) to limit their commission have returned to work after it revised the cap on agent incentive and business promotion.
The insurance sector regulator had introduced a provision last July limiting the spending of life insurance companies on agent incentive and business promotion to a maximum of 6 percent of the annual gross premium income generated through sales of new policies.
The move was aimed at controlling extravagant expenses and ending unhealthy competition among insurers to poach agency managers and agents.
Following the move, insurance agents held a couple of rounds of talks with the IB and urged it to reconsider its decision. After their demand was rejected, they brought the entire process of issuing new insurance policies to a grinding halt on December 6.
Since then, the IB had not bowed to the demands of insurance agents. However, newly-appointed Chairman Chiranjibi Chapagain has raised the cap on agent incentive and business promotion to 12 percent of the annual gross premium income.
“This cap will remain effective only during the current fiscal year,” said IB Director Raju Raman Paudel. “A committee comprising representatives of life insurance companies, life insurance agents and IB officials, which will be formed within a month, will revise the ceiling and implement it from the next fiscal year.”
Life insurance companies sell all their policies through insurance agents. Many insurance companies also depute insurance agents as agency managers who handle a group of agents working for a particular insurance company. These agency managers are generally given annual targets based on which they get paid. This payment excludes the commission they get from sales of insurance policies. “We found that life insurance companies, on average, were spending 15.6 percent of their annual gross premium income generated through sales of new policies on agent incentive and business promotion. That’s why we proposed to limit it at 12 percent,” Paudel said.
Earlier in July 2012, the IB had introduced a similar provision barring life insurance companies from spending more than 6 percent of their annual gross premium income generated through sales of new policies on guest entertainment, business promotion, advertisement and agent incentives. However, the IB could not enforce the provision.
Since the introduction of the 6-percent cap earlier this fiscal year, the IB has been strictly monitoring whether insurance companies have been abiding by the provision. However, insurance agents, except those working for state-owned Rastriya Beema Sansthan, joined the protest, stating the move had “severely hit their income”.