IRDA New Guidelines For Life Insurance Agents

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The recent decision by Insurance Regulatory & Development Authority may have been known to you if you represent any Indian Life Insurance Company as an Insurance Agent. This is the Insurance Regulatory & Development Authority’s decision:

“Insurance Regulatory & Development Authority (IRDA) has taken a unique measure to punish agents if they fail to renew insurance policies. This move is intended to curb wrong selling and will result in commissions being retracted by agents and credited back to policyholders accounts. Such policies that are not renewed will be considered Single Premium Policies.

This decision is a welcome one for me as a full-time Insurance Agent at ICICI Prudential Life Insurance Company. This will increase transparency in the Insurance Industry.

Currently, the Insurance Companies hire the sales team. These Unit Managers or Development Officers are called Sales Managers. They recruit and support insurance agents and get handsome incentives. These sales people recruit more agents to earn additional incentives, without regard for their merit. Each year, almost 100 new agents are recruited by these sales people. However, only 10 to 12 of them remain as regular agents in the industry. This practice cannot be stopped as no one can predict if a person will continue to work as an agent or quit after a few sales. This practice is also promoted by insurance companies to increase their sales.

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Many people are hired as insurance agents. They bring their own policies, then they take the policies of their friends and family. After a while they stop introducing new clients because they lack knowledge in the finance industry. As Insurance Agents, you can be employed, self-employed or unemployed. They don’t have the necessary knowledge or are not serious about their job. They view it as a way to generate income, and they pass some of the commissions on to customers. Then they quit because they couldn’t bring 12 policies per year. It ultimately affects the customers of insurance. They are left without regular after-sales service and become an orphan. This has caused a lot of problems and a bad impression for the Insurance Industry. Then came the phrase “Insurance can be sold but not brought”.

Although insurance policies are essential for everyone, they can also be used to protect family members in the event of an untimely death.

As much as possible, Insurance Agents and Mutual Fund Distributors should be considered a full-time job opportunity. All regulatory bodies should encourage it. This will increase the number of jobs and provide excellent after-sales services to customers. This will result in a significant decrease in the percentage of policies being resold.

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These are my suggestions for active insurance agents in the interest of any life insurance company.

1) In terms of recovering commissions from the first year commissions paid to agents, in the event of laps insurance policy in the 2nd Year due to no payment or renewal premium, it will cause a lot of problems to the insurance companies. Because there is a high percentage of agents quitting after introducing 1-5 policies, they receive their commissions immediately. It will then be a headache for insurance companies to recover commissions from agents who have quit their agency business. This will have a negative impact on the company’s performance and the regular premium payers will be affected by the increased expense ratio. The companies will pass the costs on to customers, and they won’t have to pay it themselves.
2) In the case of Unit Linked policies, initial premiums can range from 10% to 60% for the first year. It is 1% to 4% for renewal premiums in subsequent years. Insurance agents receive commissions ranging from 5% to 40% on these charges. Customers may be confused by the charges from different insurance companies. They aren’t all the same and can vary from one company to another.
I propose that all regular premium insurance policies from all insurance companies should have unique charges. Mutual Fund has a 2.25% entry fee – if it is invested through a distributor).
4) All insurance companies should have a unique rate for commissions to agents.
5) I propose that charges be split over the policy’s length. The annual charges should not exceed 3% to 5 % and the commission rate for agents should be between 2% and 4% for the entire policy term.
6) In order to encourage full-time insurance agents, they should be paid trail commissions, say @ 0.5% annually, on Assets under Management total on a monthly basis. This will help cover agency expenses.
7) The outgoing agents should transfer the insurance business to full-time agents who will continue to provide services to existing customers. They should receive renewal commissions and be eligible for trail commissions.
8) A trail commission is required because Unit Link Insurance Plans policies currently have surrender value of 96%, after payment of 3 year premium. Many customers choose to not pay future premiums.
9) Insurance companies should limit their expense ratios based on their fund size.
10) Other charges such as policy administration fees, fund management charges, should be the same for all companies.
11) This will promote healthy competition among Insurance companies, and fund managers with the highest skill will be given the top priority. It will be beneficial for policy holders.
12) This will encourage healthy competition among insurance agents, as long-term relationships with customers will be of great value.
13) The policyholders will also benefit from the after-sales service.
14) After completing at least 3 years of agency work, active agents should be considered.
15) Agents should have minimum lap times.
16) This will be beneficial to both active agents and end customers.

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