India: Commission & Remuneration To Insurance Agents & Intermediaries: Poised For Change

Last Updated: 1 February 2016
Article by Celia Jenkins

The insurance statutory and regulatory framework has, historically, strictly restricted the amount of commission or remuneration that can be paid to insurance agents and insurance intermediaries (such as insurance brokers, corporate agents, web aggregators and insurance marketing firms) for the solicitation and procurement of insurance business. Apart from overall commission caps contained in §40A of the Insurance Act 1938, regulations and guidelines applicable to insurance intermediaries such as the IRDAI (Insurance Brokers) Regulations 2013, the IRDAI's Licensing of Corporate Agents Guidelines of 14th July 2005 and the IRDA (Web Aggregators) Regulations 2013 also placed restrictions on the commission/remuneration that could be paid to insurance intermediaries for placing insurance business.

In addition, for life insurance products, the IRDA (Linked Life Insurance Products) Regulations 2013 and the IRDA (Non Linked Insurance Products) Regulations 2013 (collectively, "Products Regulations") placed "product-wise" restrictions on the commission limits payable to insurance agents and insurance intermediaries.

The Insurance Laws (Amendment) Act 2015 (Amendment Act), however, omitted §40A of the Insurance Act 1938 and set the backdrop for commission and remuneration limits to be revised. In the interim, Life Insurers were still restricted to the limits specified in the Products Regulations for products being launched or the limits set out in the IRDAI approved File & Use application for existing products and General Insurers were still restricted to the maximum commission amounts notified by the IRDAI through its circulars.

Following the promulgation of the Amendment Act, there was widespread debate within the insurance industry on whether maximum commissions to intermediaries should continue to be capped or whether a free market approach should be followed. However, the IRDAI appears to have made its approach clear through the exposure draft released on 13th January 2016. The draft IRDAI (Payment of Commission or Remuneration or Reward to insurance agents and insurance intermediaries) Regulations 2016 (Draft Regulations) make it clear that commission and remuneration to insurance agents and insurance intermediaries will continue to be regulated and subject to maximum limits specified by the IRDAI.

The Draft Regulations inter alia provide as follows:

  • Insurers are not permitted to pay insurance agents or insurance intermediaries commission or remuneration in excess of the limits specified in the Draft Regulations. Schedules I to V of the Draft Regulations specify separate maximum limits for various types of life insurance, health insurance and general insurance products.
  • Insurers are also not permitted to pay insurance agents or insurance intermediaries any rewards in excess of the amounts specified in the Draft Regulations. In this context, the Draft Regulations define "reward" as "amounts paid, whether directly or indirectly, as an incentive by whatever name called by an insurer to the insurance agent or the insurance intermediary towards benefits such as gratuity, term insurance cover, group life insurance cover, group personal accident cover, group health insurance cover, telephone charges, office allowance, sales & promotion gift items and such other items".
  • Insurers are required to have a policy for payment of commission, remuneration and rewards to its insurance agents and insurance intermediaries that must be approved by their Board of Directors. The objectives of the Board approved policy include the utilization of insurance agents and insurance intermediaries in such a manner that:
  • Insurance penetration and density is increased;
  • Is commensurate with the Insurer's business strategy;
  • It brings "cost efficiencies" in the conduct of business and simplification of the administration of insurance business.
  • The minimum requirements to be included in the Board approved policy include:
  • Manner and conditions for payment of commission or remuneration to insurance agents and insurance intermediaries and for payment of renewal commission and hereditary commission to insurance agents/their legal heirs after the termination of the insurance agency.
  • Manner and conditions for payment of reward to insurance agents and insurance intermediaries which is "over and above the commission or remuneration" but cannot exceed:
  • 20% of the first year commission or remuneration in the case of individual insurance agents;
  • 40% of the first year commission or remuneration in the case of insurance intermediaries.
  • Manner and conditions regarding the transfer of orphan policies.
  • Grounds and manner for the termination, suspension and cancellation of the appointment of insurance agents and insurance intermediaries.
  • Any restrictions on the products to be sold by insurance agents or insurance intermediaries.
  • The Board approved policy is to be reviewed annually and changes, if any, are to be filed with the IRDAI within 30 days of the change.
  • The Draft Regulations supersede the commission limits specified in the Products Regulations for products to be introduced. However, for all existing products, the commission limits specified by the Products Regulations and the limits set out in the IRDAI approved File & Use application for General Insurers shall continue to be the maximum limits for commission.
  • The Draft Regulations clarify that where policies are procured "directly" by the Insurer, no commission or remuneration is payable, leaving the question open in terms of whether any commission, remuneration or reward is payable on products designated as "Online" products which are attributed to the Insurer's direct channel, but may be displayed on a broker or web aggregator's website.
  • Insurers are required to file a return in the specified format of the commission, remuneration and rewards paid each financial year that must be certified by the CEO, CFO, CCO and the statutory auditors of the Insurer.

The IRDAI had sought comments from stakeholders on the Draft Regulations by 27th January 2016 and appears to be aiming to implement these regulations by 1st April 2016. Press reports indicate that the Draft Regulations have provoked mixed reactions from the insurance industry. While some stakeholders view the proposed payment structure as more liberal compared to the earlier regime, others believe that there is scope for further liberalization and that the opportunity should be seized to clarify certain open issues that the Draft Regulations presently do not address.

For further information on this topic please contact Tuli & Co 

Tel +91 11 4593 4000, fax +91 11 4593 4001 or email

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Celia Jenkins
Similar Articles
Relevancy Powered by MondaqAI
Shardul Amarchand Mangaldas & Co
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Shardul Amarchand Mangaldas & Co
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions