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Life, general, and health insurers must ensure their board-approved reward policies contain objective and transparent criteria with logical parameters for calculating rewards. Insurers must stipulate a reasonable and justifiable proportion of rewards to commission and remuneration for individual insurance agents and intermediaries, maintain consistency for similar businesses, and ensure effective board oversight of policy implementation. Insurers must communicate the maximum possible rewards in writing to agents and intermediaries at the beginning of the year. Any subsequent additions, changes, or deletions to the reward program must also be communicated in advance.
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Reference No.:IRDAI/INT/CIR/MISC/ 080/ 04/ 2020 Date:03/04/2020
Title:Circular Board Approved Policy for payment of Rewards - FY 2020-21 onwards
IRDAI/INT/CIR/MISC/ 080/ 04/ 2020 3rdApril, 2020
CIRCULAR
To,
CMD/CEOs of all Life, General and Health Insurers
Re: Board Approved Policy for payment of Rewards - FY 2020-21 onwards
Attention is drawn to Reg. 6 of IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016, which states that the reward shall be paid based on an objective and transparent criteria approved by the Board.
It is observed that the board approved policy of many insurers lacks objectivity and transparency. In certain instances the Board approved policy allowed delegation of power to the CEO or other authorised person to decide on the rewards to be given to insurance agents and insurance intermediaries. Further, there appears minimal oversight by the Board to determine the efficacy of such policy and it is noticed in many instances that the quantum of reward paid to insurance agents and intermediaries exceeds the commission and remuneration paid to them.
In view of the above, the Authority is of the opinion that there is need to clarify and elaborate the said regulatory provision for its meaningful and effective compliance uniformly by all Insurers.
Therefore, in exercise of powers under Regulation 9 of the IRDAI (Payment of commission or remuneration or reward to insurance agents and insurance intermediaries) Regulations, 2016,the following clarifications are issued:
