Insurance Regulatory and Development Authority (IRDA) now wants a complete overhaul of the rule governing insurance agents. CNBC-TV18’s Avni Raja reports that the insurance regulator is pushing for a change in rules so that insurance is sold as long-term products.
Insurance agents will now be bound by new rules laid down by the insurance regulator IRDA. The idea behind the regulations is to encourage investors to stay invested in the long-term. These rules are aimed at reducing the surrender rate and the number of policies that lapse. So what is the regulator proposing?
If any agency's annual persistency ratio is less that 50%, the agency's license will not be renewed. Persistency ratio is a measure of the number of policyholders who stick on to the period of the policy. Every agent will have to sell at least 20 policies and procure a minimum of 1.5 lakh new business premium every year.
Family members of employees of insurers cannot be recruited as agents by the same insurer. And finally, in case a policy lapses, the agent's commission will be withheld in the first year and paid only on the basis of persistency in later years.
IRDA data reveals that the current persistency rate in the industry through agents is not very high. One in five policies sold lapse in the first year itself. By the 5th year, nearly half of the policies sold end up lapsing.
Insurance agents will now be bound by new rules laid down by the insurance regulator IRDA. The idea behind the regulations is to encourage investors to stay invested in the long-term. These rules are aimed at reducing the surrender rate and the number of policies that lapse. So what is the regulator proposing?
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Family members of employees of insurers cannot be recruited as agents by the same insurer. And finally, in case a policy lapses, the agent's commission will be withheld in the first year and paid only on the basis of persistency in later years.
IRDA data reveals that the current persistency rate in the industry through agents is not very high. One in five policies sold lapse in the first year itself. By the 5th year, nearly half of the policies sold end up lapsing.
Source - http://www.moneycontrol.com/news/economy/irda-writes-new-norms-for-insurance-agents-_471155.html
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