Print Edition - 2016-12-22 | MONEY
Life insurance agents halt new policy issuance
- curbs on incentives
Dec 22, 2016-
Life insurance agents have completely halted the process of issuing new policies to protest the regulator’s move to limit agent incentive and business promotion spending to 6 percent of annual gross premium income of insurers.
The Insurance Board (IB), the insurance sector regulator, in mid-July introduced a provision that barred life insurance companies from spending more than 6 percent of their annual gross premium income generated through sales of new policies.
Following this, insurance agents held a couple of rounds of talks with the IB and urged the latter to reconsider the decision. After their demand was not met, they have brought the process of issuing new life insurance policies to a grinding halt at seven of the nine life insurance companies operating in the country.
Insurance agents working for state-owned Rastriya Beema Sansthan and MetLife, however, have not taken part in the protest.
“The protest was launched without coordinating with me,” said KP Adhikari, general secretary of the Insurance Agents’ Association, an umbrella body of insurance agents which launched the protest.
Despite the launch of the protest, renewal of life insurance policies has not been affected.
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 is exclusive of commission they get from sales of insurance policies.
The payment that insurance companies extend to agency managers is enrolled as incentive in balance sheets of insurance companies. Although insurance companies are legally allowed to extend incentives to agents, the IB has found that this legal loophole is being misused to dole out excessive amount to insurance agents.
Earlier in July 2012 the IB had introduced a similar provision barring life insurance companies from spending more than 6 percent of annual gross premium income generated through sales of new policies on guest entertainment, business promotion, advertisement and agent incentives.
The move was aimed at controlling extravagant expenses and ending unhealthy competition among insurers to poach agency managers and agents. But the IB could not enforce the provision.
This time, however, the IB has been strictly monitoring whether insurance companies are abiding by this provision. Insurance agents, on the other hand, said this move has started “affecting their livelihood”.
“Many agency managers rely on payments from insurance companies for a living. If they are barred from getting these payments, we’ll have to exert pressure on insurance companies to hire them as permanent employees,” said Nanda Tiwari, acting president of the Insurance Agents’ Association.
To press this issue, life insurance agents have halted the process of issuing new insurance policies since December 6. They have given a 15-day deadline to the IB to address the issue, which is expiring on Thursday. “If our demands are not met till then, we will launch fresh protest programmes,” said Tiwari.
The IB has said it is trying to find out an amicable solution to the problem.
Published: 22-12-2016 08:45