Life insurance companies may soon impose a 30 per cent commission cap on corporate agencies for credit life insurance policies. Credit life insurance is a policy designed to help with loan repayment in case of the insured’s death before full repayment.
According to reports, life insurance companies are close to forming a consensus on this matter for self-regulation amid concerns of GST evasion. According to media reports, life insurance companies are on the verge of agreeing to impose a 30 per cent limit on the commission paid to corporate agencies, including banks and non-banking finance companies (NBFCs), for credit life policies.
Where Did The News Come From?
According to its sources, the Economic Times has received news of considerable discussion on this issue in the Life Insurance Council in the last few months. Although no official letter has come from the council regarding this yet, according to sources, the talks are at a very advanced stage through which things can be decided along the lines of self-regulation.
Why Will This Step Be Taken
This step is being taken because the insurance industry is trying to adjust to this by changing its marketing practices. According to the report, insurance regulator IRDAI has decided to impose product-wise caps instead of companies. This was done because the insurers were facing allegations of GST evasion.
IRDAI (Insurance Regulatory and Development Authority of India) is the regulatory authority for the insurance sector in India.
What’s The Whole Matter?
In March, IRDAI implemented regulations related to the payment of commission, which were brought in place of the traditional product-specific commission, to put a cap or limit on the overall expenses of insurance companies. Under this, companies were instructed that the costs of insurance operations should be covered under the overall expense limit of 30 percent. However, despite this, most insurance companies were adopting policies with 30-35 percent commission or more premium to increase their market share.
According to the report, it was found that some bank insurers and NBFC-insurer partnerships are offering such policies in which the premium has been directly increased from 5% to 35% to cover the same amount of sum assured with housing of Rs 1 crore. Went.
What Is Credit Life Insurance?
Credit life insurance is a policy designed to help with loan repayment in case of the insured’s death before full repayment. However, IRDEO found that even though this policy is optional, its cost is added to the principal amount of the loan. If the customer opts for this, there has been a significant increase in the premium.
